Wednesday, April 09, 2008

South African Energy Prices May Double; COSATU Plans Mass Action in Response to Food and Power Hikes


Power prices must double – Eskom

Wed, 09 Apr 2008

There is an urgent need to double electricity prices over the next two years, Eskom told the National Electricity Regulator of SA (Nersa) in its recent application for a tariff hike.

"Thereafter, once they are at acceptable economic levels, prices can escalate marginally just above inflation rate," the power utility said its submission released on Tuesday.

R60bn govt loan

"The financial analysis already assumes a R60-billion government loan and aims to maintain Eskom's credit rating to enable the company to fund the build programme."

Nersa made an edited version of Eskom's application available on its website. Earlier, it said sections of the submissions would be withheld to protect the company's position in co-sales deals.

In its application Eskom asked for a revision of the 2008/9 electricity prices from 14.2 percent to a 53 percent real increase or a 60 nominal increase.

"If the status quo remains, the price increase for 2009/10 will be almost 100 percent," Eskom said.

It said it fully recognised the proposed tariff hikes could have a negative impact on customers with "undesirable social impacts".

Eskom said it incurred higher primary energy costs in 2006/7 and 2007/8.

Projections for 2008/9 would result in the utility barely breaking even in the current financial year, and it could incur significant loss in the next one.

Protecting the poor

Eskom said there were a number of options to soften the impact of sharp price increases on the poor.

"A simple and easy way is to implement a method applying a lower price increase to tariffs that should receive protection while increasing the other tariffs."

Earlier, Eskom spokesperson Andrew Etzinger said the application to withhold sections was to protect the company's position in "hard-core" coal sales deals.

Etzinger said that without this stance, the company might have to pay more for coal, pushing the price of electricity up even more.

The company is currently in negotiations with mining houses to buy about R45-million worth of coal, currently at a spot price of around $100 a ton, compared with around R100 a ton about two years ago, said Etzinger.

"Unfortunately this means that discussions are hard core. We are not talking about one or two percent here or there, so we have to make sure our negotiating position is as strong as possible."

The application document contained details of deals already concluded, he said.

"It is a sound commercial decision not to disclose the information about the concluded contracts that are captured in our application. It would compromise Eskom's position at the negotiating table," said Etzinger.

This also applied to information on its energy saving campaign.

The company has put several energy saving initiatives out to tender as part of its bid to avoid current power shortages that have led to scheduled electricity blackouts.

"We don't want to reveal the negotiating targets because we will find it difficult to manoeuvre... the dynamics are quite serious." Sapa


Mass action against rising costs

Wed, 09 Apr 2008

The Congress of South African Trade Unions (Cosatu) plans to embark on rolling mass action against rising food, electricity and transport costs, and interest rates, the SABC reported on Wednesday.

This comes after the Competition Commission announced the formation of a crack team to investigate price fixing in the food industry.

Cosatu secretary-general Zwelinzima Vavi said the labour federation would mobilise the public, to show its "anger in the streets".

He said from next week, a series of marches, demonstrations and stay-aways would begin.

"We have made a call for every organisation in South Africa to join us, so we can build the biggest coalition of organisations opposed to the current hikes, particularly in the food prices.

"This would put pressure on food manufacturers, retail companies and farmers, so that they stop profiting on the expense of the poor and ordinary South Africans."

Cosatu said its protest action would be directed at Business Unity South Africa and its relative affiliates, farmers organisations, and government departments such as agriculture, land affairs, trade and industry, treasury and social development. Sapa

1 comment:

Pan-African News Wire said...

Keys to SA’s energy future are in the hands of cities

Sarah Ward

SA IS in the grips of a severe energy crisis, complete with rolling blackouts, industries stopping operations, much blaming and frustration — and plenty of opportunities.

The crisis now squeezing Africa’s most industrialised (and electrified) nation has been brewing for some time. Eskom is one of the largest single electricity utilities in the world — it produces 96% of SA’s electricity and 85% of sub-Saharan Africa’s.

Its electricity is the cheapest and among the dirtiest in the world. SA has been ranked as the least efficient user of electricity out of 13 comparable upper middle-income countries (Brazil is more than twice as efficient, Hungary three times and Mexico four times).

Now there is not enough power — somehow Eskom and the government did not respond to demand projections. Billions are being hastily allocated to Eskom to “quickly” build new coal-fired and nuclear plants. There is very little mention of, and no serious funding for, renewable power plants or energy efficiency programmes.

Fundamental to the problem in SA is the centralisation of power (in all senses of the word). Eskom is the proverbial tail that wags the dog.

We are a country force-fed, and by now heavily addicted to, big power from one utility and one source of energy (electricity from coal power).

This was a system built up to serve a heavy-industry, mining, nuke-friendly apartheid state and, despite some efforts to change this by our new democratic government, it has in effect been allowed to continue.

When we should have been investing in efficiency and renewables, Eskom and the government were pursuing a pebble bed pipe dream (small nuclear reactors which we would sell to China, which has now built its own pebble beds).

Promising renewables such as wind, wave and concentrating solar power plants are relegated to endless studies and even bogus pilot projects. Skilled staff have been laid off and maintenance schedules ignored.

As with Jack’s giant or David’s Goliath, the colossus is falling. We stand at a moment in history that will determine SA’s energy future: do we shore up the giant, or do we make a break for it — and change SA’s energy picture forever, and for the better?

There is nothing like a crisis for opening the doors for much needed change. Suddenly energy has become everyone’s issue — and it is this “democratisation” of energy that can spur the change. But how?

Cities have the potential to be key movers and shakers here. Energy is the lifeblood of cities and they stand out as highly energy-intensive nodes.

SA’s 10 largest cities use almost half of the country’s energy, they account for three-quarters of the gross domestic product and are home to half the population.

Cities have different regional functions, needs, climates and resources: it is time for cities to step out of the “one-size-fits-all” national shoe and take charge of their own energy security, carbon emissions and equity of access, and actively engage in developing an energy picture to suit their needs.

Imagine a city where:

Substantial energy supplies are provided by locally available sources (ocean, wind, sun, waste ) by several utilities;

Energy efficiency is heavily incentivised (it is much cheaper to save electricity than to make it) and the “polluter pays" principle is applied;

Safe and affordable energy sources are available to the poor and industry is encouraged to produce and purchase clean power;

Local government buildings are retrofitted for energy saving and staff are given incentives to reduce their energy consumption;

Waste is turned into useful energy; and

All residential areas glitter with solar water heaters.

Sustainable Energy Africa has worked in partnership with cities to develop progressive sustainable city energy capacity and strategies.

A number of cities now have excellent approved strategies with impressive targets — the real struggle now is with implementation.

Cities are stuck in a quagmire of risk aversion, legislative and policy constraints and a history of being removed from their own energy production and supply.

What is needed to help cities take charge?

First, from within local government, we need political champions to take a stand on their city’s involvement in energy management, and this must be supported by appropriate institutional changes; and, as energy affects every aspect of local government, it is essential that energy capacity is built across all departments.

Second, many cities around the world that are successfully implementing sustainable energy strategies have established energy agencies based on public-private partnerships, which drive and co-ordinate the implementation of sustainable energy projects.

These agencies co-ordinate stakeholders around an action plan, raise and manage project funds and carbon trading, support the development of local energy business, support the development of much-needed skills training programmes, carry out monitoring and evaluation, and provide input to strategy revisions.

Most important, they have the capacity to bring the important players together and to make things happen.

Third, national government needs to support decentralisation and provide clarity around the energy mandate of cities; it must also support diversification, particularly by creating a conducive environment for renewable energy technologies (through appropriate subsidies, feed-in tariffs, policy and regulatory support).

The key projects that southern African cities should be implementing are:

Information and education of residents and business (experience shows that energy efficiency gains are derived 20% from technology changes and 80% from the education of users);

Mass solar water heater roll-out projects (would save 20-30% of household energy use, which translates into a 5% saving of SA’s electricity use). This must be supported by training programmes for solar water manufacture and installation.

Energy efficiency projects in commercial buildings, housing and in industry;

Power purchase agreements for renewable electricity generation supported by active engagement with the national government around tariff subsidies to support renewable power;

Waste-to-energy projects; and

Energy efficiency in municipal operations — cities must lead by example.

The benefits of greater energy security, reduced carbon emissions (and the associated economic competitive advantage), and local job creation these will bring don’t need to be spelled out.

The challenge now is for cities to see the opportunities in this crisis and to step forward to take their place at the power table.

Ward is an urban planner specialising in energy and cities and is the author of The New Energy Book, published by Sustainable Energy Africa.