Eskom tariffs could be in for major overhaul

The DTI and the DOE have indicated that they would like a radical rethink of the methodology used by Nersa to determine Eskom’s electricity tariffs.

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The Department of Trade and Industry (DTI) and the Department of Energy (DOE) have indicated that they would like a radical rethink of the methodology used by the National Energy Regulator of SA (Nersa) to determine Eskom’s electricity tariffs.

Grain SA CEO Jannie de Villiers said news of the rethink is very welcome for agriculture. “We have seen numerous increases in administered prices by government way above the inflation rate, from electricity to port and airport charges. It is putting huge pressure on our competitiveness as a nation. From a food security point of view, it is very positive that government is relooking at it and I hope it will spill over into other administered prices,” he said.

If tariffs are revised to offer some relief, it will be welcomed by all agricultural enterprises, especially high-end users like dairy, fruit and irrigation farmers. Simon Matthews, vice-chairperson of the Milk Producers’ Organisation Eastern Cape, said electricity costs were putting huge pressure on the industry.

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“Electricity has escalated dramatically. The combined effect of escalating electricity, maize, fuel and fertiliser prices is putting margins under severe pressure because we haven’t seen the same movement in the producer price. In real terms, the milk price hasn’t moved in two years. Dairy farmers are exiting the industry as a result of economics. We now have less than 2000 dairy farmers in South Africa.”

Chief among the DTI and DOE’s concerns are that high energy costs have curtailed new investment and caused businesses to close, contributing to job losses and higher inflation, according to media reports. Nelisiwe Magubane, director-general of the DOE, said during a briefing on the DOE’s annual report, that high prices had reached a tipping point with her sentiment shared by trade and industry minister Rob Davies at a media briefing on his department’s results.

Chris Yelland, director of EE Publishers, said a rethink of electricity tariffs is a significant step for businesses. “These price increases are going to be very burdensome on our competitiveness,” he said. Yelland said the current pricing mechanism was performed by Nersa on behalf of the DOE. “It effectively guarantees Eskom a certain rate of return on its investment so Eskom doesn’t take any risk.” – Robyn Joubert