ESKOM chief financial officer Paul O’Flaherty told MPs yesterday that it seemed likely that inflation-linked tariff increases for electricity were a long way off, possibly only likely at the end of the 2020s.
Until then increases would be in double digits, well beyond the 3 percent to 6 percent inflation target band, he said.
O’Flaherty appeared before the National Assembly energy portfolio committee during hearings on the multi-year price determination. He noted that the 16 percent sought by the state-owned corporation applied for the next five years.
If Eskom continued its build programme beyond the Kusile coal-fired power station where Eskom was responsible for about 65 percent of new build costs and independent power producers some 35 percent, it would still be seeking rises of 20 percent a year for a further period of five years.
This would mean 10 years of higher-than-inflation rises to 2023. After that, O’Flaherty said, “a further five years of 9 percent” increases a year were envisaged. That would take the higher-than-inflation increases to 2028. Only thereafter were inflation-linked increases forecast.
The National Energy Regulator of SA, which also appeared before the committee yesterday, is evaluating Eskom’s application for a 16 percent rise. After a process of public hearings, Nersa will make a decision on the hikes on February 28 next year: the day after the presentation of the national Budget by Finance Minister Pravin Gordhan.
The new tariff will come into effect in April.
Sapa reported last week that the SA Municipal Workers’ Union called on Cosatu to force the government “to immediately halt the unaffordable increases”. Samwu pointed out that the current price at 61c a kilowatt hour would jump to R1.28 in 2017/18.
In a presentation to the finance portfolio and select committees yesterday, the Manufacturing Circle’s executive director Coenraad Bezuidenhout said Brazil was cutting the cost of electricity to boost its economy.
“As Eskom readies itself to motivate for further increases at nearly three times the inflation rate over the next five years, which could lead to increases to consumers [of] as much as 19 percent, Brazil is cutting industrial electricity rates by 28 percent with effect from 2013,” he said.
South Africa was also burdened, he said, by municipalities charging top-up rates of up to 700 percent on top of the Eskom figure. This included Johannesburg and Tshwane while Nelson Mandela Bay stood at 548 percent and Cape Town at 336 percent. This revenue municipalities used to cross-subsidise other services.
Bezuidenhout argued that the lack of competition in the electricity industry was a major problem. “As long as independent power producers are unable to freewheel off the grid, Eskom’s cost structure will remain dominant” to the detriment to consumers.