South Africa’s largest labour federation has threatened another national strike should power utility Eskom’s tariff application come in at, or above, the price path outlined by the National Energy Regulator of South Africa (Nersa) last year.

Congress of South African Trade Union’s (Cosatu’s) general-secretary Zwelinzima Vavi told national radio station SAfm on Wednesday morning that it had never agreed with Nersa’s price path, which hinted to increases of 20% to 25% over the next three years, and would oppose any move to grant such material increases.

Vavi said that it would also not accept any upward revision until a national tariff policy had been properly established, with guarantees that the poor would be protected in an instance where tariffs rose materially.

In June last year, Nersa revised the 2008/9 power-tariff increase from the 14,2% sanctioned in December 2007, to a nominal 27,5% for the 12-month period ending March 31, 2009.

The adjustment followed an intense process arising after Eskom applied for a “reopener” to the multiyear price determination (MYDP), which was meant to have run for the three-year period from April 1, 2006, through to March 31, 2009.

Eskom applied for a massive 60% increase, indicating that such an adjustment was required to enable it to stabilise its financial position and provide it with the revenue base necessary to close a massive R150-billion-plus funding gap for a R385-billion plan to introduce a further 18 000 MW into the power-stressed system over the next five years.

But Nersa rejected the step change, and instead took its lead from and National Economic Development and Labour Council (Nedlac) electricity summit, which called for a smoothed tariff-increase path over a five-year period.

Cosatu had been a leading participant at the summit, but pushed ahead with a national protest action in August regardless, to show its strong opposition to the increase and to call for greater safeguards for the country’s poor.

TARIFF DOUBLING
In granting Eskom its increase, Nersa had indicated that price increases between 20% and 25% would now probably have to be introduced over the next few years, in a bid to ensure that South Africa’s tariffs, which are the lowest in the world, were cost reflective.

Such increases would effectively facilitate a near doubling of the average tariff to 46c/kWh, from the current level of around 25c/kWh.

Vavi said that it would take to the streets again this year and would submit to Nedlac a notice of its intention to do so should Eskom’s request come in at the level outlined by Nersa.

But there is also much speculation that Eskom could well submit a far higher application under the MYPD-2, which would run from April 1 2009 through to March 31, 2012. It would justify the move on the basis that the cost of its capital programme had escalated materially and on the fact that international credit markets were virtually no-go zones.

Initially, Eskom had anticipated making its first major global debt-raising foray during 2009, but had since indicated that this would now only likely be feasible during 2010.

It had been given some interim relief in the form of a R60-billion subordinated loan from the National Treasury, which had been followed up in January by further loan guarantees from government of R176-billion.

SUBMISSION DELAYS
Eskom spokesperson Fani Zulu refused to be drawn on the speculation, saying only that the application was imminent.

Zulu said that there had been several reasons for Eskom's failure to submit a tariff application, including a reassessment of its ability to borrow in light of the global financial crisis, as well as the need to adjust its growth in the demand forecasts.

“Secondly, the approval in December of the Electricity Pricing Policy by Cabinet also necessitated the review of the application.

“Thirdly, Eskom had to confirm other sources of funding before finalising the tariff application,” Zulu outlined.

Nersa meanwhile had stated that there would be no way for it to approve the application by April 1 given that the adjudication process, which would include a public hearing, would take “three to four months”.

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