Free State Agriculture (FSA) has warned that the approval of Eskom’s request for a 20,5% hike in the price of electricity will cripple the sector.
The state-owned power supplier has applied to the National Energy Regulator of South Africa (Nersa) to implement this proposed hike in electricity from 1 April. The request comes from the debt-ridden Eskom as its financial crisis, which has seen consumers taking the brunt, continues.
FSA has formally opposed the proposal for a drastic increase. A submission was made by the deadline of 14 January. Dr Jack Armour, commercial manager of FSA, said they would also make a submission to Nersa during the public hearings.
“This, to oppose the meaningless proposals,” he said.
“Eskom is pushing to ensure that new electricity prices can be implemented by 1 April. They therefore want Nersa to approve tariffs to Parliament before 15 March.”
Armour pointed out that Eskom’s application to the regulatory body contained three separate documents, applying for price increases in power generation, transmission and distribution.
“The unbundling that Pres. Cyril Ramaphosa referred to in the State of the Nation Address is therefore continuing.”
Armour believes that the competition for Eskom for generation will still be tough, despite the R131 billion injection promised to South Africa at the 26th United Nations Climate Change Conference of the Parties (COP26) held in Glasgow from 31 October to 13 November. COP26 is envisaged to help bring about a transition to green power.
“The public cannot be responsible for funding Eskom to expand its own alternative power generation capacities in competition with the private sector.”
Armour said the submission to oppose Eskom’s proposal was aligned with Nersa’s annual requests that FSA provide econometric and macro-economic analyses on the price elasticity of agricultural commodities’ input costs against power price increases, as well as the threshold price of Eskom at which farmers will switch to alternative energy options.
“However, there are analyses that depend on many factors at play in agricultural production and FSA has pointed out to Nersa that they will have to fund such studies themselves,” said Armour.
Francois Wilken, president of FSA, has strongly warned that the approval of the hike will cripple the sector, which is trying to recover from complex challenges caused by natural phenomenon such as heavy rains, veld fires and Covid-19.
“It is unacceptable that Eskom’s losses caused by corruption are recovered from paying customers. Agriculture will not survive the Eskom increases, if approved, along with all the other rising input costs,” he said.
Wilken referred to the losses of, among others, the Medupi and Kusile Power Station, coal contracts, as well as the R37 billion that municipalities owe.
