Shock and awe - forcing consumers to save power

Eleanor Momberg, Sunday Independent, 13 April 2008

Eskom's drive to drastically increase its electricity tariffs is a "shock and awe" tactic aimed at getting consumers to slash their consumption permanently.

And householders and businesses face punitive increases - in excess of the 60 percent increase Eskom wants the national regulator to authorise.

Eskom wants varied tariffs, with poorer consumers getting a 30 percent increase whereas most households and businesses would be slapped with a 70 percent increase.

This was the message given to economists at a briefing by officials of the department of public enterprise.

"The rationale behind hiking electricity tariffs so steeply all at once is to shock consumers of electricity into adjusting their behaviour in such a way as to reduce the demand for electricity permanently by 10 percent," the economists were told, according to a report by Econometrix.
"From a medium-term perspective, a hike in the electricity tariff will also provide an incentive for co-generation as a means of increasing the supply of electricity. In the longer term, it will pave the way for attracting private sector players into electricity generation."

The report, by Azar Jammine, Econometrix's chief economist, came as consumer bodies, businesses and unions reiterated their calls to Eskom and the government to take full responsibility for the power crisis.

Eskom and the government are also being told to stop neglecting the macroeconomic effects of the power shortages, and to convene urgently a national electricity summit involving all role players, including consumers.

Ina Wilken, the vice chairwoman of the South African National Consumer Union, demanded the dismissal of Eskom's top management. She said that for Eskom and the government to place the burden on the man in the street was going too far.

"The statement by the Eskom chief executive officer [Jakob Maroga] that increased costs resulting from their own lousy planning will simply be passed on to the consumer is the pinnacle of arrogance," she said.

"It has become abundantly clear that overpaid, incompetent managers, and the politicians who caused the present crisis, do not have the insight to solve the problem. They need to be replaced without delay."

The Freedom Front Plus also entered the fray, calling on the public works ministry to investigate the financial activities of Eskom for the past five years to determine the circumstances that led to the present tariff-increase demand.

Cosatu this week called for strikes across the country in sympathy with people who have lost their jobs because of the power crisis.

"The central executive committee is adamant that workers should not be asked to pay for the government's and Eskom's crazy mistakes," said Zwelinzima Vavi, Cosatu's general secretary.

He told the congress of the Eastern Cape branch of the National Union of Metalworkers that, as a public utility, Eskom should provide its service as cheaply and efficiently as possible.

"They must not be allowed to forget that it is our money they are spending and that we have a right to know how it being spent," said Vavi.

Jerry Vilakazi, the chief executive officer of Business Unity South Africa, said the 60 percent price hike demanded by Eskom was "very inappropriate, ill informed" and did not take into consideration the effect of the electricity crisis on the economy.

"Eskom cannot want to solve this problem by causing an irreversible economic crisis. It is very apparent that Eskom is not able to think further than savings and this therefore requires an urgent decisive dialogue by critical and social formations to respond to the crisis.

"Unilateral decision-making by Eskom and its Big Brother approach are not going to resolve the situation," said Vilakazi.

Jammine said the government's policy of keeping electricity prices low to attract foreign investment was one of the main causes of the problem. Because of that policy, there had been increased demand for electricity. The policy showed the government's folly in thinking that it knew best about running the market place.

Jammine said efforts to establish private electricity suppliers had failed because there would be no profit for them as a result of the low pricing structure. The supply problem was compounded by the fact that the government had ignored Eskom's warnings that an electricity shortage was looming.

The government "has got away with it very lightly", said Jammine.

Jammine, Wilken and Numsa want the treasury to consider using the R15,2 billion excess in tax revenue collected in the 2007-2008 financial year to subsidise citizens' power costs.

But, Thoroya Pandy, the treasury spokeswoman, poured cold water on this happening anytime soon. She said that Trevor Manuel, the finance minister, pronounced on tax issues only once a year - during his February budget speech.

Jammine said in his report that the department of public enterprise believed that, without a price hike of the magnitude demanded, the reductions in the demand for electricity would not be achieved, and additions to generating capacity through co-generation and the attraction of new suppliers would be impossible.

The national energy regulator said this week that if Eskom's request for a tariff increase, backdated to April 1, were approved, it stood to earn a profit, after tax, of about R12,7 billion.


870 words