The opposition to Eskom’s electricity tariff increases is likely to gain momentum and the government will be forced to listen to the ordinary people if it is to avoid more chaos in the country.
But such opposition needs to be correctly weighed against the long-term economic shock that could result if Eskom fails to raise enough money for the required electricity generation, according to economists.
The economists were split yesterday over what would have the most adverse results: Eskom getting the 16 percent tariff increase it has applied for or failing to do so.
The biggest opposition campaign to date has been launched against Eskom’s third multi-year price determination application and protests are expected outside the venues around the country where public hearings are scheduled to take place.
The National Union of Metalworkers of SA, which launched its opposition campaign on Sunday, will submit its official public comment in the first public hearing meeting taking place in Cape Town today. The union has called on the National Energy Regulator of SA (Nersa) to deny Eskom the tariff increase of 16 percent a year for five years it has asked for and grant it an inflation-linked tariff instead.
Yesterday a consortium of civil society organisations, including the One Million Climate Jobs Campaign, The Right to Know Campaign and the Economic Justice Network, invited more civil organisations and the public to join a massive demonstration outside the Cape Town International Convention Centre.
Mike Schussler, the chief economist at economists.co.za, said this opposition would weigh significantly when Nersa made its determination on Eskom’s application. “Nersa is answerable to the government and the government is answerable to the people. What’s becoming clear is that whether it’s toll roads, municipal rates hikes or Eskom increasing the cost of electricity… people have had enough… I can’t see the government not listening to that.”
He said in a research study by his firm did last year, South Africa had, by far, the highest electricity increases over the past seven years. Only Turkey had a similar price increase pattern, but at half the rate of South Africa’s price hikes.
“I believe there will be a much broader voice as we move forward with this matter because people are becoming desperate. We will still get increases but not as big.”
Econometrix chief economist Azar Jammine said the big question was whether Eskom could afford a lower tariff. But he said with electricity demand having fallen sharply in the past few years while electricity tariffs continued to increase, Eskom had accumulated a lot of money that could go towards its revenue requirements.
However, Jammine cautioned against models that suppressed electricity tariffs, while using other sources to fund electricity generation.
“If Eskom does not get what it needs and they have less money to go towards electricity generation capacity, the economy won’t grow fast. It’s a Catch-22 situation. The alternative is for Eskom to borrow more money, which will increase government spend,” Jammine said.
He said the resulting situation would be increases in interest rates or higher taxes, which would slow the country’s economic growth.
Eskom said the economic models it had studied showed that it was better and fairer for tariffs, and not taxes, to pay for electricity.
The utility said cost-reflective tariffs would ensure that it was sustainable and did not burden taxpayers.
When Eskom put together its application it made provision for securing resources to run existing operations, financing new capacity, and paying to procure power from independent power producers (IPPs). It said the 16 percent increase was made up of an average annual increase of 13 percent plus 3 percent to introduce new IPPs to the system.