Make electricity tax-free: consumer forum


Copy of ca p6 eskom protest don

Protesters outside Cape Town International Convention Centre show their disapproval of Eskoms proposed 16 percent tariff rise. Picture: Henk Kruger

The National Consumer Forum has branded Eskom a “parasitic institution” for wanting to increase the price of electricity by 16 percent, and suggested that electricity be tax-free like brown bread and milk.

Imraahn Ismail-Mukaddam, the forum’s Western Cape co-ordinator, said this on Tuesday in presenting his submission to the National Energy Regulator on why Eskom’s application for a 16 percent hike should be denied.

The forum is a voluntary organisation representing about 100 000 consumers countrywide, according to Mukaddam.

A small group of protesters picketed outside the Cape Town International Convention Centre during Tuesday’s submissions.

The energy regulator is holding public hearings on Eskom’s proposed revenue application multi-year price determination for 2013/14, otherwise known as MYPD3.

In contrast with MYPD1 and MYPD2, which both spanned three years, Eskom is now proposing a five-year determination for MYPD3 to ensure a predictable, longer-term price structure.

The increase would take the price of electricity from 61 cents a kilowatt-hour in 2012/13 to 128c a kWh in 2017/18 – more than doubling the price over five years.

Eskom chief executive officer, Brian Dames, and chief financial officer, Paul O’Flaherty, on Tuesday told the hearings the application supported investment by independent power producers and Eskom.

An average annual increase of 13 percent was intended to meet Eskom’s needs over five years, plus 3 percent to introduce new independent power producers.

The application was based on new capacity that Eskom was committed to building, up to the substantial completion of the Kusile power station.

“We have included a long-term price path to implement new capacity beyond Kusile, but this is not included in our revenue requirement for the five years,” they said.

They argued that if electricity was sold at the “right price”, it would be used more efficiently, so less would have to be invested in new generating capacity.

Mukaddam said most consumers could not afford electricity, and an increase would simply worsen their economic stress.

“South Africa is energy insecure because although we produce enough energy (for electricity), it is unaffordable and out of reach for most of the poor,” he said.

“What is the benefit of the roll-out of electricity when people can’t afford it? We have that situation already in townships, where the highest-selling products in tuck shops are candles and paraffin because people can’t afford electricity,” Mukaddam said.

He said poor households were spending 21.4 percent more than what they earned because the cost of living was already high, and the tariff increase would increase their burden.

“We are in a dire situation. It’s not all rosy out there… Stop using electricity for tax collection – electricity is an essential product and should be VAT-free. The (Nersa) panel should do an affordability assessment before any increase is considered,” he said.

Viola Manuel, chief executive officer of the Cape Chamber of Commerce, who also made a submission yesterday, said Eskom’s proposed increase lacked creativity and innovation, because there were cheaper and quicker means of increasing the country’s electricity capacity without resorting to nuclear or coal-based power.


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