On top of the 14,2% increase in the electricity tariff in December last year, the of SA (Nersa) has granted a 13,3% increase While this is nowhere near the 53% that requested, many fear it’s more than beleaguered consumers can bear. To counter negative affects on the economy, Nersa laid down specific conditions for granting the increase.
They decided not to allow Eskom to backdate the increase to April, and advised that tariffs should be increased from July. The regulator supports the plan for incremental tariff hikes of 20% to 25% per year over the next three years, but this must be supported by a process of checks and balances to ensure Eskom is accountable for the spending of the revenue generated by the increases.
Further no increase will be applied to Eskom’s poor customers other than the increase of 14,2% levied in December 2007. N ersa will develop a mechanism to take into account unforeseen changes in the primary costs of energy, as paid by Eskom. It will also monitor the prudence with which the costs are incurred; Eskom’s measures to control costs and its ability to predict them; and that conditions of license be amended to ensure risks are efficiently and optimally managed, particularly with regard to primary energy. – Jasper Raats
Manuel refuses to debate fuel tax
inance minister Trevor Manuel flatly refused a request from the Democratic Alliance (DA) to debate the merits of reducing government tax levied on the fuel price, said the DA spokesperson on minerals and energy, Adv Hendrik Schmidt. S chmidt said the DA’s request was a bid to mitigate the growing negative impact of the escalating fuel price on the economy. “The government levy of R1,25/â„“ contributes to ever-increasing inflation and food and fuel prices,” explained Schmidt. “Government levies collectively account for well over 20% of the petrol price.
As such, government could – even temporarily – reduce these levies to grant consumers some respite. Minerals and energy minister Buyelwa Sonjica discussed the possibility of an urgent debate on the matter with Trevor Manuel, but Manuel refused to consider the notion.” Schmidt said a decrease in the tax on petrol would directly reduce transport costs and indirectly help relieve food-price pressures. “There is a potential scope for the reduction in the general fuel levy as the increase in the number of motorists resulted in a fuel levy of R26,4 billion for the 2008/09 financial year,” said Schmidt.
“This is an increase of R2,4 billion over the previous year. It’s plain common sense what the impact of such a reduction would be on agriculture. “Farmers are especially hard hit and a well-managed plan to supply the agricultural sector with affordable fuel would benefit us all. Food inflation is a serious problem and could be counteracted to a certain extent by keeping the fuel price as low as possible.” I n the meantime the Freedom Front Plus (FF+) announced plans to launch an independent investigation into the price determination mechanisms of the Department of Minerals and Energy.
This follows the refusal to reduce fuel taxes, says Willie Spies, FF+ spokesperson on minerals and energy. “Indications are that there are a host of viable reasons to rethink the way prices are determined,” said Spies. “The current model is based on the international fuel price, without taking cognisance of the significant percentage of locally produced fuel. It’s rumoured Sasol earns as much as R100 million/day, while consumers are doubly hit. They carry government tax on fuel and are also burdened with VAT on it. “These realities should be addressed to protect consumers against further inflation hikes and economic deterioration,” he concluded. – Annelie Coleman
Mixed reaction to electricity hike
The 13,3% Electricity rate hike granted by the National Energy Regulator of South Africa (evoked mixed reactions from political parties and farming organisations. Many fear that given the current economic climate, consumers won’t be able to absorb the increases on top of escalating interest rates and rising fuel and food costs. Farmer’s Weekly approached a number of political and business leaders on the matter. These are their comments:
Independent Democrats, Lance Greyling
“Sanity has prevailed. We’re happy with the news that poor households will be protected from the tariff increase and that the poor are spared further suffering. They carry a triple burden as a result of escalating food, fuel and electricity prices.”
FF+, Willie Spies
“The increase means electricity rates escalated by a total of 27, 5% since last year. We’ll investigate the constitutionality of the proposed increase, as we’re convinced it’s unconstitutional.”
DA, Hendrik Schmidt
“An agreement to any additional tariff increase without an independent enquiry would be reckless in light of Eskom’s mismanagement. It’s not enough to merely throw money at the problem.”
AU SA’s Paul Van der Walt
“It’s unbelievable that Nersa didn’t consider the warning of the president of the Reserve Bank, who said a rise of more than 6% will frustrate inflation targets and can lead to further increases in interest rates. Will this mean that we will see an even earlier rise in interest rates?”
Agri SA’s Lourie Bosman
“Agriculture is dependent on market factors, as determined by supply and demand, for price formation of its products, and rising input costs of this magnitude can hardly be recovered in current market prices. Based on the increase, additional electricity costs for agriculture, will amount to about R300/year. Further adjustments of between 20% and 25% can apparently be expected in the next three years.” – Annelie Coleman
