High gas and electricity prices will undermine job creation

South Africa has the most expensive natural gas and the 15th most expensive electricity in the world, out of 18 countries surveyed.

This is according to the NUS Consulting Group’s International Electricity & Natural Gas Report and Price Survey 2013.

The continuous increase in the price for energy makes it more expensive to live in South Africa and this affects poor households the most. Furthermore, significant constraints are placed on South Africa’s prospects of economic growth and job creation.

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Energy Minister, Dipuo Peters, needs to take the future of gas, its pricing, as well as its contribution to the national energy mix into account before releasing the draft Integrated Energy Planning Report in July 2013.

In the meantime, the DA will make an urgent submission to the National Energy Regulator of South Africa (NERSA) to review the current method of increasing the price of different energy sources simultaneously.

In this submission, we will call for NERSA:

•To clarify the effect the non-completion of the Integrated Resource Plan and the simultaneous price increase of all sources of energy has on the price of energy in South Africa;
•To consider gas as an alternative energy and indicate how it adjudicates on gas prices for use in households, business and large industrialisation; and
•To indicate what the regulator has done, through benchmark pricing, for affordable gas prices in South Africa.

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According to the survey, electricity prices in South Africa showed the third-highest increase in the world during 2013, while the price of natural gas rose 101.7% to 12.55 US cents (R1.25) per kilowatt hour.

South Africa was the only country without any forecasted price reductions for gas. Though gas only accounts for 3% of South Africa’s current energy consumption, it holds great risks to industrial users’ future profitability. Industrial users are a great contributor to employment.

South Africa’s total gas reserves stood at 770 billion standard cubic feet in March 2012. The National Planning Commission’s study “Towards a New Power Plan” also recognises the need for natural gas generation to be commissioned now, to add extra power to the grid within three years.

The continuous increase in the price for energy in South Africa not only hurt South African households but also places significant constraints on economic growth and job creation. The DA has called repeatedly for an urgent review of the country’s twenty year energy plan. We need to plan effectively for our future to affordably power South Africa into the future.

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