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consumers to pay more for energy

By unknown | Feb 21, 2008 | COMMENTS [ 0 ]

Joel Avni and Zweli Mokgata

Joel Avni and Zweli Mokgata

Yesterday's budget was bad news for anyone who uses electricity.

Though the government promised to send R60billion Eskom's way over the next five years to help it build more power stations, it will be taxing consumers 2c for every kilowatt-hour they use. That's the amount of electricity consumed by one 100W lamp burning for 10 hours or a single bar electric heater for an hour.

And the tax comes on top of electricity rates that are expected to double, at least, over the next five years. The new tax is expected to raise about R2billion this fiscal year, but that should grow to about R4billion within a few years.

Homeowners now pay about 24c a kilowatt-hour for electricity.

Eskom plans to spend R343billion over the next five years on infrastructure such as new power-generating plants and electricity lines. About 73percent will be dedicated to new generating capacity.

Another R2billion will be spent on programmes to persuade users from homeowners to giant industries to use electricity more efficiently.

Apart from taking decommissioned, inefficient old coal-fired power stations out of mothballs and building two massive new plants in Mpumalanga and Limpopo, Eskom also plans an extensive programme of introducing new nuclear plants.

Smaller plants will generate electricity from renewable sources such as the sun, wind and water. Industry will be encouraged to use waste energy such as steam to generate power. But these alternative sources are far more expensive than coal and nukes, though much less threatening to the environment.

The measly government contribution will force the utility to raise a substantial portion of the remaining R280billion from loans, which will hammer its credit rating and force it to pay more for borrowed money.

Economists said yesterday that they expected the government would have to shell out more to prop up Eskom than the R60billion Finance Minister Trevor Manuel announced yesterday.

Azar Jammine of Econometrix in Johannesburg also questioned if the R60billion would be enough to dent Eskom's plans to rebuild its capacity.

"R100billion would have been more meaningful," Jammine said.

He said he expected local financial institutions would jump at the opportunity to lend Eskom the money it needs, and that a careful balancing of expenditure might mean that the utility's credit rating would not take a dive.

Rejane Woodroffe of Metropolitan Asset Managers said Manuel should spell out details of the tax incentives he promised users who reduced their consumption.

Eskom officials were unavailable for comment yesterday.


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