Govt supports gradual, not rapid, Eskom hike - Peters

23rd February 2010 By: Margie Inggs - Creamer Media Correspondent

The National Energy Regulator of South Africa will on Wednesday make the much-anticipated announcement regarding the increase in Eskom's electricity rates over the next three years and while the utility has asked for a 35% a year increase, the Reserve Bank has estimated that the regulator will probably only grant it 25%.

While this is still high, especially for poor households, Energy Minister Dipuo Peters said at the opening of the African Utility Week in Durban on Tuesday that there was an estimated R27-billion backlog in the maintenance of the distribution network.

"While the Department of Energy is not in favour of rapid increases in rates, there is a need to invest in power stations and we need to reassure those that don't have electricity that they will be connected," she said.

"We would like to indicate unequivocally that tariffs are going to rise steadily as we build more generation and distribution capacity of our power networks. It is, therefore, critically important that we weigh the advantages of investing in infrastructure, while at the same time increasing tariffs. The consequences of not having the infrastructure are too grave to even imagine."

She reiterated that the government was doing everything in its power to ensure that the poor were cushioned against these higher-than-normal electricity tariffs and that industrial consumers continued to cross-subsidise domestic customers.

Eighty per cent of Africa's 800-million population have no access to electricity, which is a key requirement for economic development. Peters said that electricity utilities across the continent were faced with the challenge of having to focus on the issue of revenue generation to remain viable and sustainable.

"Gatherings such as the Indaba could begin to correct the anomalies," she said. "We have to work together to seek opportunities and drive investments in the energy sector of our economy.

"We are all grappling with serious challenges of the shortage of infrastructure in so far as the entire value chain of generation, transmission and distribution is concerned.

"Through the Southern African Power Pool, we have identified regional bankable projects which require financial institutions to have confidence in the true potential that this sector brings to the economy of our continent and our sub-Saharan region."

Peters said the first thing that needed attention was the issue of universal access, and in line with this, the government had set itself the target of providing electricity to all formal households by 2012.

The three most energy deprived provinces, which account for 25% of all households without electricity, are rural KwaZulu-Natal, the Eastern Cape and Limpopo.

"Our total installed capacity is just above 40 000 MW and we have to compete with huge economies like China which are bringing on stream about 40 000 MW of electricity generating capacity each year as part of their drive to ensure that their supply meets the demand," she said.

"They are doing this to make sure that their economic growth continues to hover around double digit figures."

She said the government was gravitating to generating 10 000 MW hours of electricity from renewable sources by 2014.

"The country needs to start moving towards renewable energy, particularly in rural areas where the potential for small-scale renewable investment projects is huge," she said.

"This has to happen while governments are simultaneously ensuring that the masses of our people continue to receive these services at prices they can afford. Our utilities in particular are facing formidable challenges as they quite correctly implement credit control measures and proper metering systems in order to maximize their revenue collection potential."

She said it was important to maintain a proper balance between the demands of free basic electricity and charging high users the exact prices for which they provided them with electricity.

Peters said the government could not solve the energy problem alone and that it remained committed to ensuring adequate participation by the private sector.

Public Enterprises Minister Barbara Hogan said the massive R486-billion bill for energy provision could not be supplied by government alone or by consumers.

"We have to look to private sector investment and independent power producers must come into play," she said.

"Eskom can no longer have a monopoly. There must be competition."

Ambassador Joseph Wilson said Africa's potential would never be realised until energy was developed to the point that industries could grow and prosper.

"The continent must be developed, rather than exploited," he said.

"Economic development must match Africa's growing political maturity."