POWER utility Eskom’s proposed 16%-a-year increases to electricity prices for the next five years would devastate the economy and inflate South Africa’s stubbornly high unemployment rate, the South African Chamber of Commerce & Industry (Sacci) told the National Energy Regulator of South Africa’s (Nersa’s) public hearings in Gauteng on Wednesday.
The hikes would more than double the price of electricity over five years, taking it from 61c/kWh in 2012-13 to 128c/ kWh in 2017-18.
Sacci CEO Neren Rau said the increases would lead to a loss of about 2.56% in gross domestic product and a reduction of 4.5% in employment over the five years.
Sacci has about 17,000 member companies.
The 16% hike would force many of the chamber’s medium-size and small member companies to move operations abroad and shed jobs, Mr Rau said. "More than 50% of our members indicated that operations would have to be scaled down."
Up to 66% of members surveyed, however, said they could accept an increase of between 5% and 10% over five years. Less than 5% indicated they could handle a 16% increase.
Eskom asked Nersa at the hearings in Midrand, Gauteng, to authorise its application, saying the increases would help it achieve a better investment rating.
The power utility requires R1.09-trillion in the next five years to finance new capacity and run existing power stations.
Eskom chief financial officer Paul O’Flaherty stressed that the 16% increases were reflected costs, that would enable Eskom to recover the cost of producing electricity and finance new power stations.
Itumeleng Mosala, a senior official at the American Chamber of Commerce in South Africa, said a 16% increase would be to the detriment of foreign direct investment in South Africa.
Even if Nersa eventually settled at a rate somewhere between 16% and prevailing inflation rates of about 6%, Eskom needed to realise it could not rely on a pre-funding model to build and maintain its Medupi, Kusile and other power stations.
Energy Intensive User Group chairman Mike Rossouw said the government needed to use private energy companies to create competition for Eskom and to keep the parastatal "honest".
"The company should not be pumped full of money through large tariffs, but should be kept lean and forced to be efficient," he said.
He suggested that Nersa be enabled to intervene in the electricity surcharges levied by municipalities.
Mr Rau said members of Sacci had suggested a nationwide single tariff system for all municipal electricity pricing.
Eskom was again criticised for its replacement-value accounting model. The government has asked the utility to revalue its fleet at five times the original value, which has lifted depreciation charges.
Former Eskom executive Mike Deats said the accounting methods could be questionable, but the simple truth was that Eskom had to replace much of its equipment and plant because so much of it was too old to meet future electricity demand.
About 50 people, mostly from Congress of South African Trade Unions affiliates, protested outside the hearings.