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Eskom proposed tariff hike 'a serious shock to economy'
October 14, 2009
Electricity parastatal Eskom's latest proposed tariff hike will administer "a serious shock to the economy" next year, Business Unity SA (Busa) said on Wednesday.
The price hike would hit South Africa's economy "just when it should be coming out of a recession", Busa said.
On Tuesday, Eskom's CEO Jacob Maroga announced the utility had submitted a request to the National Energy Regulator of SA (Nersa) for a tariff hike of 45 percent every year for three years.
Busa said the proposed increase would be "bad for inflation, growth and small business in particular".
"Although the quota of free electricity would be raised to assist the poor, they would not escape the rise in costs elsewhere if inflationary pressure rose generally," Busa said in a statement.
The excessive burden of Eskom's future funding should not be placed on higher tariffs, it said.
"It is clear from recent consumer price inflation data that electricity costs are playing a major role in preventing inflation from falling faster."
"This keeps interest rates higher than they otherwise need be and hampers economic recovery."
Busa said there was a need to revisit the "mix" of tariff increases, loan financing and additional state funding in the financing of Eskom.
"These constant Eskom tariff 'crises' every few months are becoming bad for business confidence and planning."
Busa said in this context Nersa would not only have to critically interrogate the Eskom application but also encourage the urgent development of a new sustainable funding formula for Eskom for the future.
"A new business model is also needed for Eskom to promote competition and encourage alternative suppliers of electricity in a restructured electricity market," Busa said.
Busa said it would be making submissions to the appropriate agencies on the various aspects of Eskom's future in due course. - Sapa
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