For the past few years, Eskom has been plagued with mismanagement, inefficient budget forecasting and overall incompetence. Electricity supply is just not enough to meet the demand. We are also living in an age where environmental issues are becoming more serious. Eskom needs to find new greener ways of generating power. This will however, require vast amount of capital; capital which Eskom does not have.
The National Energy Regulator of South Africa granted Eskom a tariff increase of 24.8 percent for 2010, 25.8 percent for 2011 and 25.9 percent for 2012. This means that the market price of electricity will have more than double by 2012. (SAPA, 2010:1)
There are a number of reasons for the tariff hike. A demand for climate-friendly electricity generation technology has developed (EBERHARD, 2009:1). Eskom is under pressure from government to increase its supply of electricity while keeping carbon emission to a minimal. Green electricity generation is far more expensive than traditional fossil fuel generation technologies. This means that far more capital will need to be invested into power generation than ever before.
Another reason for the tariff hike is the Global Financial Crisis. (EBERHARD, 2009:1)What would normally happen in this situation is that the government would bail out Eskom. This is unfortunately not possible due to the government diminished tax income as a result of mass unemployment. This unemployment has also led to an expanded amount being spent on social issues.
Inevitably the tariff costs of electricity will have to increase. The only source of this much-needed capital is out of the consumer’s pockets.
List of references:
· EBERHARD, A, 2009 Eskom crisis will spark new deal. Mail And Guardian. 10 September. Pg 28.
· PARKIN, M, POWELL, M, MATTHEW, K, 2008. Economics (7e). Essex, England: Pearson.
· SAPA, 2010. Mixed reaction to Eskom tariff hike. Times Live. [Online]. Available: http://www.timeslive.co.za/local/article325154.ece [Accessed 24 February 2010]
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