Hands up everyone who can afford what could be a really expensive power hike if Eskom gets its way. No one? I didn’t think so.
Sadly, it looks like we all will end up paying because Eskom needs to recoup R38 billion in costs, and it wants the regulator - the National Energy Regulator of South Africa - to allow it to hike prices, again.
We have already had a hike this year, with Nersa giving the go-ahead to Eskom to hike prices 12.69% from April.
That hike will apparently help the utility recover R7.8 billion of unbudgeted costs for the three years through March 2013. The company had applied to recover R18.4 billion.
I shudder to think how high the tariff hike would have to be to get back the R38 billion Eskom wants because it needs to recoup a cash shortfall at a time when its profit is plummeting and it can’t afford extra diesel and to buy power from independent producers.
Already, the South African Reserve Bank has pointed to higher power prices as one of the reasons that inflation is under pressure, and likely to push upwards very soon. That’s why it took a cautious decision to hike the repo rate by 25 basis points recently.
And there is likely to be more to come.
I don’t know about you, but at this rate all I will have floating around in my purse will be moths. And that sort of issue is bad news for the economy because less disposable income = less spending.
We all know just how hammered the economy is right now, and the country really cannot afford to let anything get in the way of its growth, even if the Institute for Security Studies reckons we are not in a crisis.
The problem is, the lack of power is costly us all dearly: apart from the inconvenience of having to make sure dinner is done and dusted by 6pm so we can all eat before the lights go out, companies have needed to invest in generators.
Mine production has also been hit because it’s just not feasible to run a mine on diesel back up. Ditto every other large manufacturing concern out there.
It’s now become so bad that the powers that be are sitting up and paying attention. President Jacob Zuma noted just the other day that the electricity crisis is shaving 1 percentage point off economic growth annually and preventing the country from achieving its employment and development targets.
So either the power problems are going to drop us down to 1% growth, or we could have hit 3% this year if the lights stayed on. Either way, not a good situation.
I distinctly recall writing - about nine years ago - about how the government was looking to independent power producers (IPPs) to fill the power gap. At that time, then deputy president Phumzile Mlambo-Ngcuka outlined a plan to get IPPs onto the grid through government incentives.
That was the state’s solution to Eskom’s 1998 warnings that the country was running out of generating capacity.
However, as oft happens with plans, it disappeared into some File 13 somewhere.
Granted, we are making some progress, with a war room having been set up and an additional 800MW added to the grid, while co-generation with independent producers realised 450MW through energy-efficiency programmes.
In addition, another programme with renewable energy independent producers was contributing an additional 1 800MW to the grid, with a total of 6 327MW expected to be added in the next two years through 92 alternative energy projects.
Yet, it’s only now that we are starting to see alternative energy being lit up, and Eskom is battling to get that power onto the grid.
So, it seems, we’re stuck between a rock and a hard place. Either we fork out more to limit harm to the economy, or we let growth continue to slow.
Yet, if we do fork out more, we’re going to be feeling the pain in our pockets, which will hurt an economy that’s mostly driven by consumer spending.
The sad fact is, Eskom’s importance to the country’s ability to run has been ignored for years, and no-one took responsibility for ensuring maintenance wasn’t done on an emergency level, and additional capacity was added to the grid.
* Nicola Mawson is the online editor of Business Report. Follow her on Twitter @NicolaMawson
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