Unreasonable electricity price curve contributing to weak business climate – EIUG

28th September 2017 By: Terence Creamer - Creamer Media Editor

Unreasonable electricity price curve contributing to weak business climate  – EIUG

Dr Tsakani Mthombeni

The Energy Intensive Users Group of Southern Africa (EIUG) has called for urgent intervention to halt what it describes as the current “downward spiral” of a shrinking electricity sales base and increasing and unaffordable electricity tariffs.

The EIUG represents 32 mostly mining and industrial companies operating in South Africa, which account for more than 40% of the country’s electrical energy consumption and its appeal comes against the backdrop of Eskom’s latest application for a 19.9% tariff increase from April 1 next year.

Chairperson Dr Tsakani Mthombeni says he shares the concerns raised by other stakeholders regarding the revenue application’s impact on South African industry and business.

“The EIUG has already publicly stated that members, and business in general, are struggling to operate competitively in the South African economy. This is due to several challenges, of which the unreasonable and uncertain electricity price curve is but one, albeit crucial consideration.”

Mthombeni says decisions must be made immediately to halt this current downward trend if industry in South Africa is to survive and thrive. “This can only be achieved through cost-reflective, internationally competitive industrial electricity tariffs.”

In its application to the National Energy Regulator of South Africa (Nersa) Eskom has requested allowed revenue for 2018/19 of R219.5-billion, from R205-billion in 2017/18. It does not include an additional R60-billion claim associated with three regulatory clearing account (RCA) applications for the third multiyear price determination period (MYPD3), the adjudication of which was delayed by legal uncertainty regarding Nersa’s application of the RCA mechanism.

The utility has also already cautioned that, even with no increase in the allowable revenue a rebasing of sales from MYPD3 will result in a 9.4% tariff increase.

The EIUG said it reserves commenting on the specifics of the application until the group has completed its in-depth review thereof. “The group is carefully considering the application and will engage with stakeholders, including Eskom, Nersa and other business and industry groups, as appropriate.”

Mthombeni says the EIUG will submit written comments to the regulator and participate in the public hearings on the application.

Nersa has set an October 13 deadline for the submission of written comments and will host public hearings in all nine provinces between October 30 and November 16, with the first hearing scheduled for Cape Town and the last for Johannesburg.