Sud Africa : June 06, 2008
Both business and the general public have had to adapt and accept the conditions of rolling electric blackouts and unusual price increases from the country’s sole energy provider – Eskom. South African energy consumers are literally on the edge of their seats awaiting pending decisions on electricity price increases which will be announced this month by the National Energy Regulator of South Africa (NERSA).
Prior to our current power crisis which started in late 2007, the average price for electricity had increased over the past decade by an average of 4 to 6 percent per year. In mid 2007, Eskom requested a price increase of 18 percent in order to fund much needed generation and infrastructure projects. NERSA finally granted an increase of 14.2 percent.
In late 2007, amid the sudden blackouts that were sweeping the country, Eskom announced it would initiate planned outages in order for businesses to work around the non-electricity periods. The nation and more importantly the large energy consumers, including the mining industry which is the life blood of the South African economy, were asked to reduce consumption by 10 percent. Eskom then proceeded to revise their electricity price increase application by requesting an additional 53 percent rate increase to “aggressively” address the country’s power shortage.
More recently in May 2008, Eskom announced that, until further notice, rolling outages will cease as a result of its earlier call for the 10 percent reduction in energy consumption being achieved. This has puzzled and angered may business groups who have spent large sums of capital changing their business procedures and upgrading their electrical distribution to cater to Eskom’s planned outages.
The pending rate increase has also caused the inability of many South African businesses and electricity distributors (municipalities) being unable to forecast their budgets for the next financial year. Added to this is the fact that electricity distributors have based their current price increase using Eskom’s original 14.2 percent increase. Simply put, our electricity industry is in trouble and the main question now is how much money will take to provide South Africa with a solution.