POWER SUPPLY: Electricity Pricing Too Aggresive
Recent Western Cape Business News
ESKOM’s profit of R12.8 billion for the first six months of the year is an indication that recent electricity price increases may have been too aggressive and that future increases could be moderated, says the Cape Chamber of Commerce and Industry.
“We just don’t think industry can cope with a string 25 percent increases because the consequences will be negative for both business and job creation,” said Michael Bagraim, President of the Chamber.
He was struck by the fact that, according to the report, Eskom was generating electricity at a cost of 33 cents a unit, selling it at an average of 55 cents but small businesses in Cape Town were paying R1.44 a unit plus VAT.
“This tells us that we should be looking at what happens between the power station and the consumer.”
Bagraim said business understood that Eskom’s costs were rising rapidly to pay for new generating capacity, but all the costs between the power stations and the consumers should be increasing in line with inflation and that had been below five percent in recent years.
“A 25 percent increase by Eskom should translate into a much lower increase for consumers, something like 15 percent. We think it is time the National Energy Regulator had a good look at distribution costs because this could be the way to bring some urgently needed relief to commerce and industry.”
In particular NERSA should look at the retailers of electricity, the municipalities, to see if they are not taking too big a cut from electricity revenue. “Most of them make a profit from electricity sales. Cape Town admits to a 10 percent profit and 10 percent at present prices must be an awful lot of money,” Bagraim said.
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