ELECTRICITY PRICE HIKES – PAYING OUR DEBTS?
 The Bad News
Eskom’s latest electricity price hike of 34% was granted by the National Electricity Regulator of South Africa (NERSA) at the end of June this year. This was just the beginning of the onerous news about this issue. It is now well known that Eskom has approached NERSA with a plan for increasing the electricity price by 45% in November and an equivalent hike again towards the end of 2010 and then 2011. According to some sources this will effectively mean that electricity prices in 2012 will be more than 5 times that of 2007 level.
This has naturally sparked an outcry from all quarters of society and the economy. It goes without saying that an increase such as this will have an enormous impact on economic growth and the ability to use electricity at every level of society. Typically, when faced with the prospect of such challenges, we see a vocal and unfortunate tendency to start blaming and trying to find somebody to hold responsible and accountable. The truth is that that this responsibility is borne by all South Africans.
There is no doubt that economic wellbeing is essential to ensure that all citizens can lead a dignified, healthy and reasonably comfortable life. Healthcare, education, safety and security and, perhaps most importantly, food production, all rely heavily on energy for their implementation. Energy largely, in today’s paradigm, means electricity.
The Cost
There are two inescapable factors that need to be taken into account in this debate. The first is that South Africa had a policy for decades to attract investors with artificially low prices of electricity. An abundance of relatively cheap coal and a, perhaps unwitting, disregard for the environment allowed this policy to become reality. This discount was funded by borrowing against the resources of the current and future generations. Reality has caught up and the cost of generating electricity is no longer capable of being deferred.
We now have a situation where the cost of the current and additional electricity generation and transmission needs to be funded with real hard cash. Eskom is simply not able to do this based on its current revenue streams. Eskom therefore needs more money. It can either obtain this from an outside source or by putting up the price of electricity. Realistically the only possible source of “free” outside money is government (i.e. you and I as tax payers). This means that all citizens fund the generation and transmission of electricity. Either this means increasing taxes to meet this shortfall in government funds, or diverting funds from where they are currently being spent to electricity. There is arguably a degree of frivolous expenditure on the part of government but the truth is that this is relatively insignificant. Public funds are used for education, health care, safety and security and other aspects of economic development. Can any of these pursuits afford significant budget reduction? By obtaining the necessary funding from an increase in electricity prices, it is the users of electricity who are directly funding the ongoing generation and transmission thereof.
The second major issue is the cost to the environment. Whatever the situation may have been in the past, global warming is now upon us. Apart from the lunatic fringe, there is no one who does not accept that carbon emissions are out of control and a direct factor in exacerbating the climate change. Even if funding were available to generate all the electricity that South Africa needs, we can simply not afford to keep generating electricity through coal fired power stations in the manner that we have been. South Africa’s carbon emissions are among the worst in the world when looked at in relation to our GDP. Anyone who lives in or has travelled through Mpumalanga’s Eastern Highveld (the heartland of coal fired power generation in this country) will know that the area is extremely polluted in terms of its air quality.
South Africa currently has an electricity generation capacity of 40 000 mw. According to Bobby Godsell, Eskom’s chairperson, if South Africa is to aspire to a first world standard of living for all of its citizens it will require 80 000 mw of capacity in the next 25 years. According to Godsell this will mean that South Africa needs to extract the maximum possible generating capacity out of coal, nuclear, solar, wind and biomass forms of generation. Godsell added that it is possible to ensure that coal generation can be much cleaner. Naturally there is a cost to this clean technology.
What we can do?
But there is something that we, as citizens and electricity users can do. Through the judicious use of electricity and adopting a lifestyle that makes energy efficiency an imperative, we can drastically cut down on the electricity we use. Firstly this simply means a change in lifestyle habits. How many lights are seen burning when they are simply not necessary? How often are air conditioners mindlessly turned on when naturally ventilation would do the trick? Perhaps the business world should start wearing T shirts instead of ties to work? Introspection by individuals and corporations, and a willingness to devote a little time to optimising energy use, could go a long way.
Secondly, there are technologies that can be employed which will also save electricity. Granted these require some investment but with electricity prices going where they are, the returns on these investments are becoming more and more viable all the time. Solar water heating, energy efficient lighting, low energy appliances are all becoming more available and will make a significant difference.
We all know that we need to spend money wisely, and most of us starting to realise that we need to save our planet. By employing our energies towards energy efficiency and judicious electricity use we will achieve both. By blaming and trying to find a saviour because electricity’s cost is moving towards to a level of reality, will do neither.
Brandon Abdinor | Executive Director
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