Electricity should grow economy, not profit – expert

Electricity should be a primary economic activity and not a service that is run at a profit, says Ted Blom, energy analyst and adviser to the energy and mining industries.

Blom and Brian Sechotlho, Head of the Department of Electricity Pricing and Tariffs at the National Energy Regulator of South Africa (Nersa), were part of a panel discussion at the Africa Utility Week which is currently taking place at the Cape Town International Convention Centre.

The topic under discussion was whether cost-reflective tariffs are the solution to electricity utilities’ funding gap.

Cost-reflective tariffs are considered the true cost of supplying electricity without the reliance on government subsidies to fund the gap between the current tariff and the true cost of the supply of electricity.

Blom argued that cost-reflective tariffs couldn’t work in the instance where the power utility has a monopoly, such as Eskom in South Africa.

“Electricity costs have gone up by double digits and it has killed the vestiges of industries,” Blom said.

He was critical of South Africa’s energy policy and said if a country has an unfriendly tariff regime it would deter investors and industry players. “We shouldn’t be surprised if there’s no growth in the economy and high unemployment. It’s important to understand what the root cause of the problem is and the root cause is policy.”

Blom made it clear that he was not attacking Nersa per se. “Nersa is new and they have a difficult time. They have a giant whispering in their ear, saying ‘I need more money’. And it’s difficult when you’re on the same payroll.”

He added that South Africa lost out on a 3% to 5% GDP growth since government introduced new policy tariffs for electricity.

Nersa’s Sechotlho said government’s mandate is to supply reliable electricity, but that doesn’t come for free. “Government could either tax citizens, or use electricity tariffs. We choose the latter – the ‘user pays’ principle, as it is not a good idea to sponsor investment (in electricity).”


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Electricity should grow economy, not profit – expert