Eskom’s application for electricity tariff increases should reflect its costs and be transparent, the Energy Intensive Users’ Group (EIUG) said yesterday.
“Currently, tension exists with affordability of electricity to customers at one end, and a need for cost-reflective pricing that supports a viable and funded electricity sector on the other,” EIUG chairman Mike Rossouw said.
Eskom is compiling its third multi-year price determination application for review by the National Energy Regulator of SA (Nersa). The application covers the period 2013 to 2018.
Economist Mike Schussler was quoted by the Mail & Guardian as saying that electricity prices in South Africa were set to more than triple in the next five years.
Schussler said from 2005 to date, electricity prices had increased by 91 percent, while the consumer price index had risen only 35 percent.
Rossouw said: “These increases will continue to hit all consumers in the pocket and will, furthermore, undermine the viability and international competitiveness of commercial and industrial exporters.”
The burden on commercial and industrial customers was exacerbated by hidden cross-subsidies embedded within the current tariffs, he said.
Rossouw, who is a director of Xstrata Alloys, said Eskom’s revenue and electricity price methodology was, “if prudently applied, economically sound”.
There was a need for greater transparency and accuracy in the costs making up Eskom’s revenue requirement and the associated electricity pricing. Costs had to be benchmarked to ensure they were prudent.
Rossouw proposed that Eskom should manage operational costs and risks, and use optimal technology in new generating capacity.
Rossouw said an initial view communicated by Eskom in the mandatory consultation process signalled increases of between 14.5 percent and 19 percent a year for the five-year period.
“Such above-inflation increases to power prices would inevitably impede economic growth [and] job creation, particularly in the more energy intensive resources, manufacturing and production sectors,” he said.