by Pietman Roos

Eskom Multi-Year Price Determination (MYPD3)

SACCI's commentary on Eskom's price hikes

SACCI raised concerns about electricity prices impacting negatively on businesses
high prices.jpg

Wide stakeholder engagement and member views are crucial to forming SACCI policy proposals and SACCI took the opportunity to engage with the leadership of Eskom on numerous occasions prior to formulating their response. Most importantly, the SACCI document was also disseminated to members for their input along with a survey on the prickly issue of electricity prices.

The survey amongst members tested the impact of electricity prices on business activity. Most businesses (77%) said electricity made up 15% of total business cost and that the average c/kwh price paid is R1.26.

This means that the average margin between end-user prices and Megaflex (national electricity price) is 235%. Worryingly, the majority (51.9%) of businesses indicated that their operations will be scaled down to compensate for increased electricity costs and 77.8% indicated that their products or services will decline in competitiveness due to the price increases. Against this background, SACCI chose to highlight three crucial policy issues.

First, SACCI emphasised that a paradigm shift in municipal electricity pricing is necessary. Municipal electricity surcharges are supposed to recover the cost of supply and not act as cross-subsidisation for other municipal mandates.

As such, the cost of supply must be linked to the surcharge by an objective analytical framework like a Regulatory Impact Assessment (RIA). This is consistent with the single tariff system proposed in the Electricity Pricing Policy (EPP) –

municipalities will have to show (by way of a RIA) why they need a surcharge

Second, the private sector should be encouraged to become energy self-sufficient. Regulation must therefore be improved to facilitate faster conversion to captive grids and back-selling of electricity. In this regard, the regulator must ensure that all regulations and policies be finalised to facilitate the inclusion of Independent Power Producers (IPPs) into the grid network.

Third, because the long term view of electricity infrastructure development has a profound impact on immediate circumstances, there is a need to investigate the possibility of engaging in longer term debt trajectories to ease the current tariff increase cycle. It is similarly also necessary to reassess the electricity demand modelled by Eskom to take longer term growth implications into account

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