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Durban - Consumers will have to tighten their belts firmly in coming months as the eThekwini municipality warned on Thursday that its electricity price increase in July would be more than the 8 percent granted to Eskom.
The same would apply to all municipalities across KwaZulu-Natal that supplied electricity.
Consumers should brace themselves for possible load-shedding and higher electricity increases in future after Eskom failed to get its requested 16 percent increase from the National Energy Regulator of SA (Nersa).
Deena Govender, the eThekwini municipality’s senior manager for electricity pricing and marketing, said that initial calculations showed that the increase of the municipality’s general operating expenses was above inflation and would result in an average greater than 8 percent.
Its increase would only be effected three months after Eskom’s, and adjustments needed to be made to recover the revenue lost during those three months, Govender said.
“We must also consider that the allowed 8 percent increase is an average increase across Eskom’s customer base, of which eThekwini is one customer. The impact will be different for different customers, and actual increase to eThekwini will still need to be investigated.”
Eskom said yesterday it would detail the tariffs for each category of Eskom customer - residential, municipal, industrial and rural - once it had studied Nersa’s determination on the tariff structure.
Govender said about 70 percent of the electricity department’s expenses was the cost of electricity, and any increase from Eskom had a severe impact on the municipality’s budget.
“The other 30 percent of our expenses are direct operating expenses incurred in ensuring our network is functioning reliably and the cost of the provision of this service.
“The lower increase is a double-edged sword. While lower increases will help the depressed economy and put back cash into our pockets, it will put Eskom under pressure to do more with less,” Govender said.
Andrew Layman, the chief executive of the Durban Chamber of Commerce, warned that any joy over the tariff hike could be short-lived.
The consequences could be load-shedding or higher tariff increases next time. However, despite this, and although the increase was higher than inflation, he said it was a “nice surprise” for consumers.
“I think businesses are very pleased and will be breathing a sigh of relief. A lot may have already done their budgets, and would have budgeted for 16 percent or 12 percent. It would have been foolhardy for any business to have budgeted for less than 8 percent.
“Some business may actually save money now after budgeting,” Layman said.
But consumer activist Ina Wilken was unsatisfied, and said: “I know people are saying ‘at least it is not 16 percent’, but it’s still above inflation.”
As all businesses used electricity to produce their goods and carry out their services, everything else would be affected, she said.
“So we must not say it is not so bad – it is very bad. We are not happy,” Wilken said.
“This is bad news for Eskom’s balance sheet,” said Peter Attard Montalto, an emerging markets economist at Nomura in London.
“The government is asking Eskom to accelerate its infrastructure programme and take the bulk of that on its shoulders while not allowing it to raise funds through user-pay-principle to fund it,” he said.
Agri SA president Johannes Möller said the tariffs were “realistic” and ”conducive to creating a more certain business environment.”
In a statement, Eskom said that it needed to study Nersa’s decision to understand its consequences and assess its impact.
It said that its application for 16 percent was based on “current regulatory rules and policy, and Eskom’s mandate to keep the lights on”.
Nersa cited the global economic recession as the reason why it approved an average of 8 percent increase.
- A power cut nearly disrupted Nersa’s announcement about the tariff increases in Pretoria on Thursday.
The first jokes surfaced seconds after darkness descended on the reporters assembled.
“Was this a veiled warning?” asked a reporter.
Another piped up: “Give us our increase... or else.”
Officials wore sheepish grins during the 10-minute wait for power to be restored at the Nersa building in Madiba Street, Pretoria.