Q1)
> isn't the laudable aim of the S.E.C.C. to
> promote a great increase in consumption?
Q2)
> Doesn't that imply increased
> electricity production?
Q3)
>Don't you need more dams/reactors/power stations
> to meet that demand?
Thought you had me in an untenable contradiction, eh.
A1) Yes, for SECC and other urban/rural movements (low-income households consume less than 2% of all electricity, so tripling or quadrupling that level would be the first desirable outcome, so as to achieve all those positive externalities of electricity).
A2) No, not on a net basis for society if we can combine it with a shutdown of the horrid energy-guzzling smelters which -- while consuming more than 50% of all eletricity -- create nearly no jobs and whose forex earnings evaporate to the London Stock Exchange where our main corpos now operate. (The main one under fire is, as mentioned, Coega in Port Elizabeth, where the struggle is documented at http://www.coega.org.)
A3) And no, not if redistribution is the main objective, achieved in part through massive conservation by SA's morally-repugnant elites. Again, on water we've proven that pretty decisively, in relation to Africa's biggest public works project, the corrupt Lesotho mega-dam scheme (http://www.queensuc.ca/msp has an article on the preferred route--"demand side management"--in the form of a protest document we filed against the World Bank in 1998, plus their ineffectual rebuttals, and there's a new Ben Cashdan film -- "White Gold" -- just out on this very issue). On electricity, we debated this point a week ago with the government's main policy heavies. Here are some techie notes, if you're still interested in the gory details:
(Also in today's news: the electricity company Eskom--against whom millions will go on a two day general strike next week--had its security firm kill at least two people yesterday in the Vaal, an hour south of Jo'burg, when the two joined a community group who resisted Eskom's disconnection of electricity due to the residents' inability to pay.)
Notes (by Patrick Bond) from electricity policy panel debate, 16 August 2001
These are my own notes (slightly expanded) about the lines of argument and rebuttal that emerged last Thursday evening.
For the forthcoming Municipal Services Project study on Soweto electricity, which we anticipate releasing in coming days, we would very much like to include some of the points below. Any correction or amendment would therefore be warmly welcomed.
In addition, it is our intention in the Municipal Services Project to continue to engage in friendly, constructive and vigorous debate, and we appreciate the efforts made so far, especially by Sipho and Gillian of hands-on video to call us all together to put our thoughts on record.
Panel from electricity sector:
Nelisiwe Magubane, chief director: electricity,
Department of Minerals and Energy
Xolani Mkhwanazi, chief executive officer,
National Electricity Regulator
Jacob Maroga, manager, distribution
Panel from civil society:
Neva Makgetla, senior researcher, Cosatu
Virginia Setshedi, activist, Soweto Electricity
Crisis Committee
Wiseman Hamilton, Johannesburg Anti-
Privatisation Forum
Patrick Bond, Wits University associate
professor and co-director, Municipal Services
Project
According to officials, South African electricity is characterised by the following four key accomplishments:
1) Eskom has electrified more than two million
households since 1994. Substantial cross-
subsidies exist between industry and households-
-approximately R1,8 billion (including subsidies
to mainly white farmers)--which have allowed
this process to expand as far as it has to date.
2) Eskom offers the world's cheapest electricity
to industrial users. The overall price of Eskom-
supplied electricity fell by 15% from 1994-2001.
One result is the attraction of major industries,
such as aluminum, ferrochrome, and steel
processing.
3) The present process of rationalisation and
restructuring of the electricity sector will
continue, with the objectives of more
streamlined administration, economies of scale in
distribution, adoption of commercial operating
principles, establishment of a level playing field
for Eskom's potential competitors, revenue
collection through taxing Eskom, and imposition
of rational (economic-based) pricing systems
characterised much less by the debilitating
diversity of the present system.
4) As surplus generation capacity winds down,
the Department of Minerals and Energy will
promote nuclear energy as an environmentally-
friendly alternative.
But critics pointed out contradictions within the four alleged accomplishments, which in turn suggest possibilities for dramatic reforms:
1) Eskom's electrification of low-income
households is unsustainable, because the per-unit
price is too high for low-income households.
The price to consumers via pre-paid meters is in
excess of R0,30 per kiloWatt hour, which has
had the effect of reducing demand for electricity
far below what Eskom anticipated. In turn,
relatively high electricity prices--compared to
disposable income--have led to a dramatic
reduction in the speed and scope of rural
electrification, and to an unprecedented
campaign of electricity cut-offs both by Eskom
and by its municipal government clients.
The vast majority of Eskom's white
customers are able to pay on the basis of a
metered system, while the vast majority of
Eskom's black clients must pay on the basis of
a pre-paid meter, which gives Eskom a generous
source of credit from low-income people.
Electricity cut-offs are being handled in a
most incompetent manner, and blatant
inaccuracies and vastly overinflated estimates
characterise the bills received by Soweto
customers. In addition, Eskom customers in
Soweto are paying higher per-unit prices (by a
few cents) than are households in Sandton who
are on a different tariff system also operated by
Eskom. (The break-even point at which the
Sandton tariff makes sense is roughly 500 kWh
per month, and the average Sowetan household
usage is 600 kWh per month, so more than half
the Soweto households should be billed
according to Sandton's tariff.) Sowetans who
consume more than the average have not been
informed by local Eskom staff about their ability
to change tariffs so as to have the lower rates
enjoyed by Eskom's Sandton residents.
While the cross-subsidy from industry to
households is acknowledged, it should be clear
that it remains insufficient to assure that low-
income people gain access to sufficient
electricity. Worse, reports discussed in labour-
government meetings suggest that a cost-plus
pricing strategy that may be adopted as Eskom
commercialises could raise the electricity costs
to households by 20-50% (this was not denied
by officials present).
One important reason that the high prices and
anticipated increases may be adopted by Eskom
and the government is that the full set of
benefits (positive externalities) associated with
electricity access are not being factored in.
(These include a net improvement in the
environment, many fewer respiratory disease and
other public health problems, fewer hazards
associated with fire, greatly increased gender
equity, improved productivity on the part of
workers, improved capacity to learn on the part
of youth, greater chances for class desegregation,
and many economic spinoffs from those who can
use electricity for income-generating purposes.)
2) While Eskom offers the cheapest electricity to
industrial users in the world, this has several
negative implications. Firstly, the cost of
environmental damage associated with the
extreme C02 emissions associated with coal-fired
electricity generation is not taken into account in
the pricing. The distortions caused, in the
process of generating electricity for huge mega-
consumers (Alusaf, Columbus, other Highveld
projects, Saldanha, Mozal, etc) have been part of
the case against South Africa in international
trade, aid and investment projects (most recently
in a threat to end further International Finance
Corporation investment in the Mozal smelter
complex). In addition, the environment is
harmed by the increase in S02 and other
emissions, which would not take place were it
not for the excessively cheap electricity. (Part of
the rationale for large consumption was the
overcapacity experienced during the 1980s-90s
due to the ill-considered excess construction of
coal-fired and nuclear plants by Eskom.)
Secondly, the benefits of the large industrial
projects are elusive. There are typically fewer
than 1 000 permanent jobs per mega-project.
There are typically very few, if any, backward
and forward linkages. And a large share of the
hard currency acquired through exports of
electricity-intensive products (aluminum,
stainless steel, etc) is typically siphoned off to
the site of ownership. In many cases, majority
ownership in the mega-industrial projects is held
by companies domiciled for investor purposes in
Britain or Australia.
If the mega-industrial users and the mining
houses are consuming the vast bulk of the
electricity in South Africa, then they are also
driving up the long-run marginal cost of
electricity, since when the current excess
capacity runs out, much more expensive energy
generation sources will have to be constructed.
3) Aside from conforming to international
ideological trends associated with "neoliberal"
electricity sector restructuring (which are widely
recognised as contributing to extreme inequality
and deprivations in state service provision in
most countries), and aside from anticipated job
losses invariably associated with market-driven
parastatal commercialisation (which have
sometimes dramatic social costs), there are
objective consumer-related problems that can be
identified with the electricity sector's
restructuring. The institutional restructuring
proposed by the officials will result in three
negative developments. Firstly, permission will
be granted for private firms to engage in
generation of up to 30% of the national market,
which will in turn lead to those firms cherry-
picking the market so as to seek highest-profit
large customers, hence reducing the scope for
cross-subsidisation from industry to low-income
consumers.
Secondly, the establishment of six Regional
Electricity Distributors (REDs) will excessively
centralise electricity so as to disempower
municipalities from using surplus revenues to
subsidise other vital municipal services (e.g., fire
protection, against regular household paraffin
spills).
Thirdly, although it may appear
contradictory, the six REDS are insufficiently
centralised to take advantage of national usage
by mega-consumers, leading to a smaller pool
from which to gain cross-subsidies for local low-
income users. Given the extreme inequality
between regions in South Africa, the difficulty
of a national-local cross-subsidy due to regional
REDs boundaries will make the electricity
sector's developmental mandate much harder to
achieve.
4) The use of nuclear energy--especially pebble-
bed reactors--as an alternative is highly dubious,
given decades of information about nuclear
accidents and hazards, about waste disposal
problems, and about the economic inefficiencies
associated with nuclear power when such risks
are factored in to the national insurance system
as a whole. The amount of South African
taxpayer money and Eskom surpluses spent on
nuclear R&D is shocking, compared to the tiny
amounts of money available for vitally-needed
research on solar, wind, geothermal and other
potential renewable sources.
The officials generously replied to these arguments. Of greatest importance, perhaps, was the National Electricity Regulator's concession that so-called "cost-reflective" electricity pricing--which he is mandated by government to pursue--could be interpreted beyond mere financial inputs/outputs, to incorporate the many social, economic and environmental costs (and benefits) of electricity. The main policy-making official from government confirmed that the various positive benefits of electricity are highly valued. This would appear to give some scope for technical discussions.
Yet it was pointed out that if this openness to broader cost-benefit analysis was serious, the following problems would not be so obvious in 21st century South Africa:
1) the overall price of electricity to low-income
people would not be beyond their means;
2) cutoffs of electricity supply, including cables
and including entire geographical areas, would
not be happening (instead a lifeline supply
would continue to be provided);
3) the practice of self-cutoff of electricity,
through inadequate income to afford pre-paid
cards, would not be so common;
4) the denial of electricity to thousands of
schools and clinics would not be so common;
5) the rural electrification programme would not
be slowing down, given the many millions of
people still unserved;
6) the possibility of local-local electricity cross-
subsidisation (from excessive consumers to those
with basic-supply needs still unmet) would be
firmly encouraged by the Regulator through
mandatory implementation of progressive block
tariffs (whereby accounts with high consumption
per resident are charged higher marginal costs,
as is common in the water sector);
7) the national-local cross-subsidy from industry
to domestic consumers would be larger, and the
high levels of subsidies (hundreds of millions of
rands per year) for commercial farmers would be
more critically examined to determine whether
farmworkers share the benefits adequately;
8) officials at national level would not be tardy
in implementing the free basic electricity supply
to all South Africans promised by the African
National Congress in election manifesto last
October: "ANC-led local government will
provide all residents with a free basic amount of
water, electricity and other municipal services,
so as to help the poor. Those who use more than
the basic amounts will pay for the extra they
use" (the tardiness by Eskom, for example, has
been the basis for even Johannesburg refusing to
provide the free basic amount to its own
electricity customers);
9) the Regulator would not shy away from
endorsing the key component of the ANC
promise, namely "all residents," which implies
that there may be means-testing rather than a
dramatic restructuring of the consumption tariff
along progressive block-tariff lines;
10) the unit of analysis in discussions about
future implementation of the ANC free basic
electricity promise would be an individual
person, not a "household" (given that low-
income families are often disproportionately
large in number, especially given the impact of
AIDS);
11) the cheap appliance strategy of Eskom
would be made part of a broader industrial
strategy to ensure that with some free electricity
there will be a switch from use of wood/coal for
cooking/heating to hotplates, stoves and geysers;
and
12) a sufficiently large free supply--e.g., 1 kWh
per *person* per day as suggested by Soweto
leaders (instead of, e.g., Cape Town's 20 kWh
per *household* per month)--would be offered
to all South Africans as the "basic" amount, so
as to ensure that the benefits of free electricity
(public health, hazard abatement, environmental
improvements, gender equity, desegregation,
economic spin-offs) are genuinely within reach
of low-income people.
The Municipal Services Project is often asked, "If you are so critical, what is your alternative?!" The short-hand reply to this question, is "The RDP, the Bill of Rights of the Constitution, the Grootboom judgement, and the ANC Free Basic Electricity promise." The long-hand elaboration continues to be developed. But it is likely that some or all of the dozen points above would be part of whatever alternative strategy and programme emerges from progressive organisations in South African civil society.