At Greencon we have been warning potential investors in renewable products that it makes not only environmental sense but it really makes financial sense. Power per kilowatt in South Africa is way to cheap, our materials and power stations are built at international costs but our power is sold at a fraction of the cost.Then when you consider how polluting our power is to our fragile environment. Now the delay in announcing imminent price increases has put Eskom and financial planners in a tricky situation..

From Fin24, Johannesburg – A storm is brewing over Eskom’s decision to delay its application for tariff increases.

Prompting concerns that the utility may again be targeting electricity price increases of up to 80%, Eskom on Tuesday confirmed that it has held back on making an application to the National Energy Regulator of South Africa (Nersa) to measure

Eskom spokesperson Fani Zulu told Business Day that Eskom had had to review some of its assumptions that underpinned the tariff application following the world’s financial crisis.

Zulu said the crisis had “affected our customers, our ability to borrow and Eskom’s forecast of the growth in the demand for electricity”.

He also said the approval in December of the electricity pricing policy by cabinet had also necessitated the review of the application.

In addition, he said Eskom also had to confirm other sources of funding before finalising the tariff application.

“The minister of finance announced in February government guarantees to Eskom totalling R176bn. The approved guarantees are a very important building block in accessing other sources of funding,” Zulu said.

But while Zulu insisted that Eskom’s application for electricity tariff increases is “imminent”, the delay in the submission has resulted in not only uncertainty about the magnitude of the increase its request but will also delay the determination of municipal electricity tariffs.

Nersa’s head of electricity regulation Thembani Bukula said the public consultation and decision-making process for the multiyear price determination requires three to four months.

Frost & Sullivan energy analyst Cornelis van der Waal said that the delay in the application was causing uncertainty about “what is going to happen to electricity prices in the short term”.

He said the delay would also affect investment decisions of the big consumers of electricity.

Van der Waal said the credit crisis should be a factor in Eskom’s application, as the slowdown had driven down electricity sales.

South Africans are using less electricity now than they were this time last year.

Lower demand for commodities has also affected the mining industry.

Demand for electricity has fallen by about 1 500MW as ferro-alloy and steel producers cut back on production.

“Eskom must make up for the lost sales. Nobody anticipated the magnitude of the crisis. It is important for Eskom to get a fair increase,” Van der Waal said.

Waiting for the election?

But the Democratic Alliance says confusion over the pricing of electricity is compounding the effects of the financial crisis.

Energy-intensive employers will delay investing in South Africa and creating much needed job opportunities until they know how much electricity will cost.

Hendrik Schmidt speaking for the party on Tuesday said that the pricing of electricity has an equally important impact on service delivery, as municipal electricity tariffs are a key revenue contributor to local government.

“Without a pricing guide from Eskom, municipalities will be unable to project their own revenue streams and this will impact on how much they will be able to spend on providing services to their communities,” Schmidt said.

He called on Eskom to release its pricing application to the National Energy Regulator of South Africa immediately. “There is speculation that given the difficulty in accessing international credit markets,” he said,

“The South African consumer will be shocked by a hefty increase in electricity tariffs so that Eskom can make up its shortfall in funding.

“The speculation is that the government is waiting until after the general elections to publicise this.”

He insisted that in a sector in which its state-owned enterprise monopolises 95% of electricity production, it is the duty of the ANC government to take responsibility for Eskom’s excuses in justifying its inability to plan for the future.

“The financial crisis is not an excuse,” he said. “Eskom cannot afford to delay its pricing whilst it waits for a more predictable economic environment.”

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