10/07/09 www.africaoilgasreport.com

Eskom is in the news headlines again, certainly not for all the right reasons.
In late June 2009, South Africa’s power utility won a 31.5% increase in tariff from the country’s National Energy Regulator. This comes on top of the 27% increase it won in 2008. The hike has generated a buzz, largely negative, among business and labour activists, who are concerned that the slowing economy has ensured lower income for the majority of the people.
Several unlikely allies, including the South African Chamber of Commerce and Industry (SACCI), Business Unity South Africa (BUSA) and the Congress of South African Trade Unions(COSATU), are united against the increase in payment for use of electricity.
Even so, the expected revenue addition will hardly cover the capital cost of the expansion programme of Africa’s largest electricity supplier.
But amid the conversation around tariff hike and public anger at perceived poor management of the utility, the unstructured pace of growth of the company is overlooked. The tendency for Eskom to take on more and more is not being debated. Nor is the focus on Eskom as being the once and future provider of all of South Africa’s electricity needs being subjected to the robust interrogation it merits.
Eskom is growing unwieldy before our very eyes. In the past one year, its staff strength-not on contract- increased by 2,000. It has had salary adjustments for skilled staff, its publicists explain, “in order to retain top quality personnel”. The immediate and future programme of expansion is dependent largely on construction of coal -fired plants, the surest way to pollute the environment. Eskom has shelved plans for Nuclear power plants and is not keen on using gas resources, supposedly for cost reasons. A 5% rise in South African coal consumption in 2008, caused Africa’s total consumption to jump by 4%, despite drops elsewhere on the continent. Even so, the jury is still out as to whether the cost of coal that Eskom uses for its power plants couldn’t be much cheaper.
Eskom’s continued hike in tariffs gradually hacks away at its reputation as the world’s lowest cost producer. In spite of what Sacci, Busa and Cosatu might think, this is probably good.
So far, there hasn’t been much room in the national conversation for a strong opinion against Eskom’s monopoly of the continent’s largest electricity supply industry.
......full details in www.africaoilgasreport.com