Members of NUMSA and other unions picket outside the Gallagher Convention Centre during the NERSA public hearing on ESKOM's application to NERSA for increased Electricity tarriffs. picture: Chris Collingridge 451

Johannesburg - Municipalities are quaking at the prospect of huge electricity price hikes because they can’t afford them, and they are likely to lead to more protests.

Eskom’s proposed 16 percent-a-year increase could push many of the financially weaker municipalities “over the tipping point”, said SA Local Government Association (Salga) executive member Subesh Pillay.

Such increases would also “have the very real possibility of fuelling social unrest.”

Pillay was addressing yesterday’s National Energy Regulator of SA (Nersa) public hearing on Eskom’s price application. Hearings have been held around the country, and a two-day Gauteng session started in Midrand on Wednesday.

Pillay said the tariffs applied for would be unaffordable for communities, leading to higher rates of failure to pay for municipal services.

Eskom has applied to Nersa to hike the cost of electricity by 16 percent a year for the next five years, effectively doubling the price over the period.

Municipalities resell the power to their customers, adding in the cost of running their own distribution networks.

They also add a surcharge onto the electricity sales so as to fund other services.

Salga’s Mthobeli Kolisa said Nersa’s decision would effectively be a decision on municipal prices, as 70 percent of the municipal electricity cost was the bulk power purchases.

“More and more households that were able to pay will not be able to afford to do so,” he said.

Municipal subsidies would have to take care of more people, leaving less money to electrify households, and further social unrest could result.

There were more than 30 inputs lined up for Wednesday’s hearing.

“I’m not arguing that Eskom doesn’t need the 16 percent, but I don’t think the South African consumer can afford it,” said former Eskom director Mike Deats.

He queried the parastatal’s coal costs, asking where its plan was for moving coal by rail instead of road. He said plans for new power stations were not all signed up, so were unlikely to happen, and predicted even bigger price hikes in future.

Independent mining adviser Ted Blom raised the question of BHP Billiton’s cheaper electricity rates, currently the subject of a Nersa investigation.

He estimated that BHP Billiton paid less than 12c/kWh, resulting in an effective subsidy of R5 billion to R10 billion a year. He said this was not reflected in Eskom’s price application.

Several speakers noted that Eskom’s staffing costs indicated the average salary bill at the start of the five-year period was R623 000 a year, increasing to R821 000.

Itumeleng Mosala of the American Chamber of Commerce of SA said South Africa needed to attract foreign investment

. “We believe the proposals Eskom has applied for will make this harder to achieve,” he said.

[email protected]

The Star