While public hearings on Eskom's proposed rate hikes have highlighted strong criticism from business and trade unions, it is unlikely there will be any waiving of soaring power prices, says Frost & Sullivan.
While Eskom has argued that it needs to hike prices to fund its power station expansion programme, business organisations and the business process outsourcing (BPO) industry have criticised the proposed hikes, saying they could cripple industries.
The National Energy Regulator of SA (Nersa) is holding national road shows to get public comments on the energy utility's expansion plans. The hearings are expected to end this month and the regulator will then make a decision, which is expected in March.
Marc Goldstein, energy analyst at Frost & Sullivan, says that, while Eskom's current rate proposals are astronomical, compared to previous hikes, criticism from around the country could prove futile.
“Nersa has a reputation of being a weak overseer of the industry. It is likely it [Eskom] will take its lead from government,” says Goldstein.
The proposed hikes, which would spike tariffs by 35% over three years, have drawn the most criticism from the industry. The state-owned entity also proposed a second option, which would see the 35% hike followed by two consecutive annual increases of 12%.
Other options
At the hearings, Business Unity SA CEO Jerry Vilakazi also criticised Eskom's plans and proposed a five-year tariff increase plan. Vilakazi said price increases of 25% over the next two years, followed by 22.5% in 2012 and another 12.5% in 2013, would help smooth out the process and lessen the impact of sharp tariff increases on business.
Vilakazi added that urgent decisions needed to be made, saying the proposed increases of 35% would cost R80 billion.
While Eskom is in talks with the World Bank to secure a $3.7 billion loan for its expansion programmes, Vilakazi said other funding models and plans should be investigated and considered.
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