Cape Town - Eskom will face a barrage of criticism on Tuesday as a series of public hearings kick in on its proposed electricity price increases, which, if approved, will see tariffs rise by 110 percent over five years.
Eskom has applied to raise electricity prices by 16 percent per year over the next five years. This follows an already doubled electricity cost over the past three years.
This means that if approved, the average cost of electricity will increase from 61c/kWh on Tuesday to 128c/kWh in 2017.
Eskom applied to the National Energy Regulator of SA (Nersa) to approve these future increases. On Monday, the Cape Chamber of Commerce released its submission to Nersa’s countrywide hearings which will begin at the Cape Town International Convention Centre (CTICC) on Tuesday.
Unions and activists vowed to protest against Eskom’s plans, with pickets planned on Tuesday.
The chamber said Eskom’s prices were rising at an unacceptable rate.
“The proposed increases are unaffordable and will have a devastating effect on the economy and small business in particular,” said the chamber.
“The fundamental reason for the power shortage and the rapid escalation in the price of electricity is the failure of Eskom to adjust its thinking to the new challenges facing the country and the failure to take advantage of new opportunities for quick and cost-effective relief.”
The chamber said it believed it was “fundamentally wrong for Eskom to generate profits for its sole shareholder, the government. Given the massive increases in tariffs, VAT on electricity must be the government’s fastest growing source of revenue.”
The chamber also slammed Eskom’s electricity distribution mechanism which depends on local municipalities that sell power to consumers at an additional cost.
“The sale of electricity has proved to be a good source of revenue, and some municipalities have abused the situation by simply passing on Eskom tariff increases,” it said.
“We know that Eskom tariffs have increasedfdramatically but the increase in distribution costs incurred by municipalities should be in line with inflation and not Eskom tariffs. Municipal tariff increases should be lower than Eskom tariffs increases.”
The chamber said Eskom should turn to gas as a source for electricity generation.
“Unfortunately Eskom is set in its ways and its thinking is stuck in the era of coal and nuclear power. We need a new approach to electricity generation in South Africa. We have to come to terms with the reality that natural gas now provides a cheaper and cleaner source of energy than coal,” it said.
It said the problem with coal was the “massive logistical operations of mining and transporting coal to power stations and then disposing of the ash after combustion.”
“These are costs that will continue to rise year on year as wages and transport costs go up. In addition, coal-fired power stations consume vast quantities of precious inland water while pollution problems and acid rain are well documented. Our coal reserves have been overestimated and this could lead to shortages and increased costs,” it said.
The chamber argues that “major change in the economics of power generation has resulted from a dramatic fall in the price of natural gas following the discovery of vast shale gas reserves.
“During the last two years there have been massive, world- class discoveries of natural gas off the coast of Mozambique and Tanzania. We already have a gas pipeline from Mozambique and we should be thinking about expanding it to feed new power stations,” it said.
“Off the Cape West Coast we have the Ibhubesi gas field with enough proven reserves to run a large power station for 20 years.”
Castro Ngobese, spokesman for the National Union of Metalworkers of SA (Numsa), said they planned to protest outside the CTICC on Tuesday. The union reportedly “feared jobs would be lost and the cost of living (would) increase should Eskom’s application to Nersa succeed.”
Numsa said a snap electricity cost survey that the union conducted in November 2012 among companies with energy-intensive production processes revealed that as a result of the proposed tariff increases, 37.5 percent of the companies surveyed anticipated that they would have to close down.
They feared job losses of between 500 and 600 employees over five years at surviving companies.
Christelle Terreblanche, speaking on behalf of the One Million Climate Jobs Campaign and other organisations, said they had been granted permission to demonstrate outside the CTICC at 1pm on Tuesday.
Affiliated organisations set to join on Tuesday’s protest include the Energy Governance Initiative-SA, Green Connection and the Right2Know campaign.