Businesses brace for mid-year electricity price hikes

MAY 12, 2017
Businesses brace for mid-year electricity price hikes

Retail and industrial users look to energy and cost-saving alternatives

With the colder weather now setting in, business and industrial electricity users are bracing for a “perfect storm” of winter price hikes due to hit the country from June.

First up is the anticipated implementation of Eskom’s winter rates, which will see consumers paying more per kilowatt-hour for electricity usage between June and August.

This, according to Rhino Group’s energy specialist Heather McEwan, is to accommodate the huge demand placed on the national grid by additional heating and lighting requirements in the cold, dark winter months.

“Consumers will see their energy bills going up in winter but it’s not only because they are consuming more electricity but also because they are paying more per kilowatt-hour,” said McEwan.

In addition, she said the annual municipal electricity tariff increase would also come into effect in July.

“Electricity bills will rise even further in July, when the annual increase kicks in on top of the winter prices. Therefore, after August, when the winter rates fall away, consumers will still be paying more for electricity due to the annual escalation.”

In February, the National Energy Regulator of South Africa (Nersa) approved a maximum 2.2% electricity tariff increase by Eskom for the 2017/18 period, and recently capped municipal electricity tariff increases at 1.88%.

“In effect, Eskom sells electricity at ‘wholesale’ prices to municipalities, who in turn add their own ‘retail mark-up’ when reselling to consumers,” explained McEwan, adding that municipalities had until June 1 to contest the decision.

“Eskom could also still contest the Nersa ruling, which acts like a handbrake on spiralling energy costs. Even so, it has allowed an average annual price increase of 18.1% since 2008, and costs will continue to rise in the future.”

However, McEwan said all was not lost as business, retail and industrial users had a growing array of energy-saving technologies at their disposal, which could help them to take energy management into their own hands.

“Energy, like labour, is now becoming a huge cost for businesses, which will impact on their bottom line. It’s essential to become pro-active and have a long-term strategy in place to deal with it.”

While many businesses had already begun to retrofit lighting with energy-saving LED options, McEwan said lighting accounted for only 10 to 20% of the total energy load.

“As a first step, I would recommend a full energy audit to look at the bigger picture and to see where the opportunities to reduce the electricity bill could lie. Installing a voltage optimisation system, like the UK-developed Powerstar, could save an average of 10% of the total electricity load coming into a retail or industrial site.”

She said Eskom transferred electricity at a voltage higher than the required 220V, to accommodate for losses and fluctuations along the transmission lines.

“The consumer is paying for this excess voltage, which can also cause equipment to overheat and ultimately lead to breakdowns and failure.”

McEwan said the plethora of products on the market could be confusing to consumers and that it was advisable to consult an energy manager who could advise on the best quality options and right fit for a particular industrial or retail environment.

“You’re not going to solve your energy problem overnight – it’s a strategic journey best undertaken with a reliable partner. Small, incremental changes – like coating steam pipes to prevent heat loss in a factory – can lead to significant savings over a number of years.

“Install energy-efficient lighting as a first step. Then the money you save there can be invested in the next energy-saving project and the next and so on until the business is ready to supplement with off-grid like solutions like solar power.”

McEwan said larger industries should also consider certification to the ISO 50 001 standard to improve energy efficiencies as part of lean operating principles, which would help to ensure survival in an increasingly challenging business environment.

“Putting a management and reporting system in place allows a company to keep control of its energy usage. Annual targets commit the business to driving a certain percentage reduction each year and involve the whole company in reaching those targets.”

Image: ENERGY SPECIALIST: The Rhino Group’s energy specialist Heather McEwan has warned business and industry to embrace energy-saving technologies as they brace for winter rate hikes. (Image: Supplied)