Western Cape Business News

Send  Share  RSS  Twitter  28 May 2009

POWER SUPPLY: Objection To Eskom's Price Hike


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THE Cape Town Regional Chamber of Commerce and Industry has requested the National Energy Regulator to object to Eskom’s application for a 34 percent increase in the price of electricity.

Albert Schuitmaker, Executive Director of the Chamber, points out that the proposed increase follows two increases of 14.2 percent and 13.3 percent last year. “If a further 34 percent increase is approved this year, the total compounded increase on the average electricity bill will be 73.3 percent over the two years.

This comes at a time of recession when many businesses are battling to survive and to retain staff. In these circumstances the proposed increase will put many large and small businesses under increased pressure and this could lead to the shedding of jobs.”

Electricity was one of the fundamental administered prices in the economy and increases well in excess of the rate of inflation could not be justified.

Schuitmaker said last year Eskom had argued that there had been a huge increase in the price of coal, the fuel used in 95 percent of its power stations. “Since then the price of coal has dropped. Last year’s high coal prices are already built into the price of electricity yet Eskom wants even more money despite the fact that one of its major input costs has actually dropped. In addition Eskom should be finding that competition in industry is a lot keener than it was a year ago and that prices for the work it contracts out should be more attractive.”

The Chamber was concerned that today’s consumers were being asked to pay in advance for the building of new power stations to supply future consumers. “We believe this is wrong in principal and that the costs of future capacity should be paid for by the consumers who actually benefit from the new power stations.

Electricity is a basic input cost for all commerce and industry and price increases of the order proposed will have far reaching effects on the economy. An unfortunate aspect is that these increases come after years of marketing electricity to business. In the Western Cape, for instance, Eskom persuaded many industries to convert from coal and heavy furnace oil to electricity on economic grounds. Now, after undertaking the conversions, the electricity price rockets and industries are forced to replan their operations.”

He said business accepted the fact that electricity prices would have to increase and that energy had to be used more efficiently, but this adjustment could not be made overnight. Commerce and especially industry needed time to plan for higher energy costs. This required investment in new machinery and alternate energy and it was unreasonable to expect business to pay these costs as well as make advance payments on future generating capacity.

South Africa, like the rest of the world is facing an energy crisis and it is essential that we have the best possible co-operation between suppliers and consumers. Huge increases such as Eskom is demanding will tend to antagonise consumers and make co-operation more difficult,” Schuitmaker said.

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