The National Energy Regulator of South Africa will announce tomorrow what their decision is regarding Eskom’s proposal of raising electricity prices by 35% annually for the next three years. A press conference will be taking place in Pretoria where the announcement will be made. What do we expect from the NERSA announcement, and if they agree to go ahead with the proposal, what effects could this have on South Africans and the economy?
Commercial and domestic electricity prices have been in the spotlight for a while now. Last year, a 31% electricity price increase was implemented and then Eskom applied for a 45% further increase in October last year. Thankfully, NERSA deemed this proposal unreasonable and immediately denied Eskom permission and instructed them to re-do their calculations. Eskom has claimed that the proposed electricity price increase is to raise money for a R385 Billion power expansion programme which Eskom wishes to implement.
South Africa has just recovered from its first official recession in 17 years and some think that this increase to domestic and business electricity prices could result in the country falling back into recession. At the NERSA hearings held in January in Polokwane, Business Unity SA (Busa) CEO Jerry Vilakazi said commented that should NERSA approve the tariff application, then the country “can wave goodbye to an immediate recovery for South Africa’s economy”.
Should NERSA approve Eskom’s application of a 35% increase, then as consumers we can not only expect to pay a third more for domestic electricity prices, but the country’s overall inflation rate will most likely increase by about 0.3% which means the Reserve Bank’s target inflation of 3 – 6% would be exceeded – according to the SA Chamber of Commerce and Industry (Sacci). Sacci also added that should the increased tariff be approved, we can expect a loss of around 500 000 jobs countrywide as businesses struggle to adapt to the increased electric prices.
It has been alleged by numerous parties that NERSA have already approved the tariff increase and that tomorrow’s announcement is simply a formality that needs to be done to make everything legit. We’ll have to wait and see. Be sure to check out the electricity price announcement which takes place at noon tomorrow. We’ll be sure to blog on it right here on Sustainable.co.za so if you do miss it, come back and check out what we think about the decision.