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.<\/p>\n
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.<\/p>\n
The topic under discussion was whether cost-reflective tariffs are the solution to electricity utilities\u2019 funding gap.<\/p>\n
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.<\/p>\n
Blom argued that cost-reflective tariffs couldn\u2019t work in the instance where the power utility has a monopoly, such as Eskom in South Africa.<\/p>\n
\u201cElectricity costs have gone up by double digits and it has killed the vestiges of industries,\u201d Blom said.<\/p>\n
He was critical of South Africa\u2019s energy policy and said if a country has an unfriendly tariff regime it would deter investors and industry players. \u201cWe shouldn\u2019t be surprised if there\u2019s no growth in the economy and high unemployment. It\u2019s important to understand what the root cause of the problem is and the root cause is policy.\u201d<\/p>\n
Blom made it clear that he was not attacking Nersa per se. \u201cNersa is new and they have a difficult time. They have a giant whispering in their ear, saying \u2018I need more money\u2019. And it\u2019s difficult when you\u2019re on the same payroll.\u201d<\/p>\n
He added that South Africa lost out on a 3% to 5% GDP growth since government introduced new policy tariffs for electricity.<\/p>\n
Nersa\u2019s Sechotlho said government\u2019s mandate is to supply reliable electricity, but that doesn\u2019t come for free. \u201cGovernment could either tax citizens, or use electricity tariffs. We choose the latter \u2013 the \u2018user pays\u2019 principle, as it is not a good idea to sponsor investment (in electricity).\u201d<\/p>\n