Durban - Consumers could suffer a second blow following Tuesday’s approval of Eskom’s 9.4% electricity tariff increase by the National Energy Regulator of South Africa.
Not only would the price of electricity increase, said economist Chris Malikane, but the fact that the increase was above the inflation rate might compel the Reserve Bank to push for a higher interest rate.
Read: Nersa cuts Eskom bid by half
The associate professor of economics at Wits University forecast that municipalities would also raise their electricity tariffs.
“Municipalities will make sure they maintain their profit margins by simply passing on the financial burden to consumers,” he said.
Eskom customers will see a tariff increase of 9.4% with effect from April. Municipal tariff increases will be implemented on July 1.
Eskom had requested a R22.8 billion bailout for the costs incurred in the production of electricity during the 2013/14 financial year.
The regulator, however, rejected this.
Eskom boss Brian Molefe said Nersa’s decision did not address the question of the national power utility’s continued financial sustainability and thus would have operational consequences.
Molefe said Eskom would study the reasons behind the decision before commenting on its implication.
“We note with concern the decision on open cycle gas turbines, which will guide our operations in future in terms of balancing the energy supply and demand in a bid to avoid load shedding.”
AfriBusiness welcomed the increase, its law and policy analyst Armand Greyling said.
The decision was made after Eskom tried to persuade the energy regulator in weeks before the announcement that a 16.6% increase was justified to cover a shortfall in overall revenue and certain expenditures, Greyling said.
“After attending the public hearing on February 4, we were confident Eskom would not succeed in its bid for a 16.6% increase,” he said.
Revenue
The Organisation Undoing Tax Abuse said the decision was unjust for the citizens, who would now be required to foot the bill for the inefficiencies in Eskom.
The organisation said it would request the full reasons for Nersa’s decision, over and above the previous year’s 12.69% increase.
Ivan Herselman, the organisation’s director of legal affairs, said the increase was too lenient towards Eskom. The decision would be studied in detail, and energy analysts, economists and lawyers would be consulted to determine whether the increase was justifiable and lawful.
“The process will be started within the next weeks. We will soon make an announcement on how the public can get involved in our quest to find the information, analyse it and take appropriate action in order to curb the unaffordable rising costs of electricity.”
He said the organisation was of the opinion that an inflexible approach whereby Nersa unconditionally granted an average of 8% or more every year until 2018 was unlawful.
Public Enterprises Minister Lynne Brown said she too would study the reasons for the decision document and discuss with Eskom the implications of this lower-than-expected increase.
“Eskom needs additional revenue to complete the build programme. I have requested Eskom to provide me with a report on the impact this increase will have on its programmes.
“I appeal to all municipalities to consider the economic conditions of their citizens and businesses when considering electricity payment increases.
“They must implement their respective indigent policies to cushion the most vulnerable against this increase.”
Brown also urged municipalities to honour their obligations towards Eskom.
The Steel and Engineering Industries Federation of Southern Africa, meanwhile, said the increase was an unfortunate setback for the sector and would contribute to more job losses and postpone its recovery even further.
THE MERCURY