By Linda Ensor

The National Energy Regulator of SA (Nersa) is concerned about the general price of electricity and its effect on industry in municipal areas‚ regulatory specialist for electricity Charles Geldard said on Wednesday in an address to Parliament's trade and industry committee.

Manufacturers have complained bitterly about the electricity tariffs imposed by municipalities which rely on this as an important source of revenue. In terms of the Municipal Systems Act municipalities are allowed to add a surcharge for commercial and industrial customers.

Geldard said the funding model of municipalities needed to be addressed. For example all metro budgets forecast a steadily increasing reliance on revenue from electricity.

"The proportion is increasing by about two to three percentage points a year‚" Geldard said.

"Of particular concern is the impact on employment and the impact on the poor and Nersa will continue to act within its mandate to take this into account." It was currently busy with municipalities where there were issues with industrial tariffs and was engaging with industries such as foundries which had lodged complaints.

Geldard said Nersa wanted to move to a revenue requirement methodology for municipalities similar to that of Eskom. However this would need a properly ring-fenced electricity business and up to date and correct asset registers and recent cost of supply studies. In most cases these were problematic.

Eskom GM of pricing and sales Martin Buys called for an inter-governmental task team to come up with a national cross-subsidy framework which would determine how subsidies for strategic sectors of the economy should be funded and the criteria for subsidisation.

The task team should decide on which specific sectors of the economy needed to be protected which Buys said should be those sectors where SA had a strategic advantage such as platinum‚ ferrochrome and ferromanganese.

There had to be a coherence between support for the ferroalloy sector and pricing in the platinum by-products sector.

"An inter-governmental task team needs to agree on measures to align municipal tariffs and Eskom tariffs to level the playing field in the manufacturing sector and ensure there is sufficient fiscal support for the municipalities to maintain infrastructure and support social services."

Buys stressed that national government intervention was needed to ensure there was a level playing field between customers of Eskom and municipalities.

Buys said Eskom could not by itself subsidise a particular industry as this would be at the expense of other industries.

Representative of the South African Local Government Association Mthobeli Kolisa proposed that municipalities should have access to similar purchasing tariffs from Eskom transmission that were available to Eskom's distribution arm. Currently a differential tariff was applied and municipalities purchased electricity at the same rate as Eskom's direct customers.

He noted that municipalities were also concerned about the escalating electricity prices but noted that they were the mere transporters of electricity and not generators. Increases in bulk energy costs had to be passed on to consumers.

"The ability of the municipality to cushion these high increases is limited as they have no control over the bulk energy costs."