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CROSS-SUBSIDY ONLY SOLUTION TO ELECTRICITY HIKE –EEC

10/01/2020 00:25:00 BY STANLEY KHUMALO

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MBABANE – Cross-subsidy is the only thing that will bring relief to electricity tariffs incurred by the business community.

This was one of the responses that were brought forth by senior personnel from the local utility – Eswatini Electricity Company (EEC) – during public hearings on the proposed new tariff to be implemented in the next two financial years.

Challenges

EEC has sought the introduction of 5.4 per cent increment on the current tariff for small commercial consumers. Motivating the increment, EEC Managing Director Meshack Kunene, explained to the business community the challenges they were facing as a utility and how the revenue recouped from the tariff increment would be reinvested by the company to improve its service rendition to the consumers.

Speaking during a public hearing on the proposed power tariff, which was hosted by the Eswatini Energy Regulatory Authority (ESERA) at Mountain Inn Hotel yesterday, Kunene said the power tariff hike was necessary for the sustainability of the utility.

He said a stable and secure supply of electricity was essential to support economic growth and development, now and in the future. Also, EEC acting Customer Services Manager James Mabundza, said considering cost reflective tariff was important in order for the regulators to consider how the less privileged could access energy resources at an affordable tariff rate.

Also, the same cost reflective tariff was important for consumers, be it business or domestic, to ensure they pay the actual cost that was incurred in bringing electricity to the consumption point.

In essence, a cost reflective tariff is one that considers every cost incurred in the value chain, from generation and all the way to distribution. In the case of Eswatini, there are also imports to consider, as most of the power is imported.
“This now means, there are elements in our tariff structure that are outside the local economic set-up, which we still have to absorb, as and when the foreign supplier determines their selling price to the country.

Cost reflective tariffs do not discriminate between business or domestic customers. They only refer to actual costs, and require everyone to pay for every cost incurred without any element of cross-subsidy.”

Exporting

When exporting to the country, South African electricity supplier, ESKOM adds 0.5 per cent to whatever charge that is incurred by the consumers in South Africa.

This was a response by the executive of EEC following that a proposal had been brought to the floor that the tariff hike be confined to the local inflation rate.
“We can’t stick to inflation due to the imports clause as whatever is decided in SA is passed on to us with an addition of 0.5 per cent.”

Furthermore, the entrepreneurs had sought clarity on the pricing of electricity to small holding farmers. Mabundza explained that the T4 rate was a discounted tariff as it was a result of a 15 per cent discount of the T3.
This was in response to a question by George White, who sought clarity on why the T1 was more expensive with about E750 more per hectare when compared to the T4.

Mabundza acknowledged that ideally the T1 ought to be cheaper for small holding farmers; but it was not the case at the time. He said what was essential and needed faster was the adoption of the cross subsidy.

The Chief Executive Officer of ESERA, Vusumuzi Mkhumane, last November explained that a cost reflective tariff stage would not only benefit investors into the energy sector, through an attractive tariff level, but would also bring about economic development in the country as more job opportunities would avail.
“We will also realise an increase in Foreign Direct Investment through an increase in the number of investors coming in to set up shop within the energy sector,” he said.

Furthermore, EEC also acknowledged that they were expensive than their South African counterparts ESKOM. Vusi Gama cited that the utility referred to EEC as a premium client as they added half a per cent to whatever charge was incurred by their clients in SA.