By Eleanor Momberg
Eskom's drive to drastically hike electricity tariffs is a "shock and awe" tactic aimed at getting consumers to permanently slash their consumption.
Householders and businesses face punitive increases even higher than the 60 percent hike Eskom is seeking from the national regulator.
Eskom wants varied tariffs, with poorer consumers getting a 30 percent hike, while most households and businesses would be slapped with 70 percent increases.
This was the message given to economists at a briefing by officials of the department of public enterprises.
Cosatu last week called for sympathy strikes across the country for workers who had lost their jobs because of the power crisis.
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"We are adamant that workers should not be asked to pay for the government's and Eskom's crazy mistakes," Cosatu general-secretary Zwelinzima Vavi said.
In a briefing paper from Azar Jammine, chief economist of Econometrix, economists were told: "The rationale behind hiking electricity tariffs so steeply all at once is to shock consumers into adjusting their behaviour to reduce the demand for electricity permanently by 10 percent.
"From a medium-term perspective, a hike will also provide an incentive for cogeneration as a means of increasing the supply.
"In the longer term it will pave the way for attracting private-sector players into electricity generation."
Jammine's report came as consumer bodies, business and unions reiterated calls to Eskom and the government to take full responsibility for the crisis.
They called on Eskom and the government to stop neglecting the macro-economic effects of the power shortages and said a national electricity summit involving all roleplayers, including consumers, needed to be held urgently to come up with ways to navigate the crisis.
Jammine said the government's policy of deliberately keeping electricity prices low to attract foreign investment was one of the main causes of the present problem. The policy had resulted in increased demand for electricity.
The failure of efforts to establish private electricity suppliers - because there was no profit in it for them - was compounded by the fact that the government had ignored Eskom's warnings that an electricity shortage was looming.
President Thabo Mbeki's apology to the nation for the crisis meant the government "has got away with it very lightly".
Jammine said in the document economists were informed by the department that, without a massive price hike, the reductions in demand for electricity would not be achieved and additions to generating capacity would not be possible.
"The big decision is whether or not such a price hike should be instituted all at once, as opposed to being phased in," he said.
"If the price is not increased dramatically, the department fears the shock effect will be foregone. On the other hand, several economists expressed the view that it is foolhardy to concentrate on changing a single price that is so important so dramatically without taking into consideration other macroeconomic implications."
The pricing decision has to be made by June 6.
Also to emerge was the fact that the drive to generate funds for expansion of electricity generating capacity was contributing to insufficient attention being focused on the need to upgrade distribution capacity.
Economists were told the price hike being requested by Eskom, amid the energy crisis that erupted since it was granted a 14,2 percent increase for this year by Nersa, be made up of a 53 percent real price increase plus 7 percent for inflation.
The regulator said last week that should Eskom's request be approved, backdated to April 1, Eskom could earn a profit, after tax, of about R12,7-billion.
Ina Wilken, vice chairperson of the SA National Consumer Union, demanded the dismissal of Eskom's top management, saying for Eskom and the government to now place the burden on the man in the street was going too far.
"The statement of Eskom CEO (Jakob Maroga) that increased costs resulting from their own lousy planning will simply be passed on to the consumer is the pinnacle of arrogance," she said.
"It has become abundantly clear that overpaid incompetent managers and politicians, who caused the present crisis, need to be replaced without delay."
- This article was originally published on page 2 of Cape Argus on April 13, 2008
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