050910 Electricity pylons carry power from Cape Town's Koeberg nuclear power plant July 17, 2009. South Africa will need 20 gigawatts (GW) of new power generation capacity by 2020 and would require double that amount a decade later to meet rising demand, the country's power utility said September 7, 2009. Picture taken July 17, 2009. REUTERS/Mike Hutchings (SOUTH AFRICA ENERGY BUSINESS)

The government yesterday announced that electricity would go up by only 16 percent, and not the 25.9 percent that had been expected.

But despite the reduced increase, there are no guarantees that municipalities will pass on the same margin to their consumers.

This comes as the government, along with Eskom’s executives, yesterday urged all South Africans to work harder to conserve electricity.

Announcing the increase in Pretoria, Eskom’s chief executive Brian Dames and Public Enterprises Minister Malusi Gigaba refused to comment on whether there would be involvement by the government and the parastatal in ensuring that municipalities passed on the reduced tariff to households and consumers.

While both stressed that the benefits of the reduced tariff had to be passed on to consumers and households, Dames said: “While we believe that municipalities will ensure that the benefits are passed on, it is the decision of the municipalities.”

He refused to comment on what financial incentives Eskom’s executives would receive for the decrease, saying the press briefing “is not the platform to discuss such matters”.

Zola Tsotsi, chairman of Eskom’s board, said Eskom had made it clear that alone they could not keep the lights on. “Everyone needs to recommit themselves to the efficient use of electricity, especially (regards) energy saving,” he said.

Tsotsi said the decrease in the expected tariff increase was an unwavering “commitment” to SA.

Dames said the revised tariff achieved a balance between the interests of SA and Eskom’s customers, credit providers and shareholders.

“We have done this on the basis that there is no compromise of Eskom’s financial viability, that there is a continued commitment to migrate to cost-reflective tariffs and that there is a price path certainty within an extended timeframe.”

Dames couldn’t say whether this decrease would be a once-off thing or whether it would be something for the future.

“Significantly improved capital allocation and execution, including rescheduling of payments for the Medupi and Kusile power stations, currently being constructed, allows room for decelerating price increases.

Dames said Eskom was committed to maintaining its investment grade credit and was in a strong financial and operational position.

He said the decrease in tariffs was to soften the impact of higher tariffs on the economy, release funds for investment, ensure debt returns remained intact and facilitate direct economic stimulus.

Sapa reports that the SACP, Business Unity SA (Busa), Solidarity and the Freedom Front Plus have welcomed the cut in the tariff hike.

Busa

said the announcement came at a time when there were concerns about the impact of increasing electricity prices on the cost of doing business in SA. “It also comes at a … time to assist in reducing the overall impact of administered prices on the inflation basket, and the knock-on effect on interest rates.”

- Graeme Hosken