Eskom ‘price hike cycle must be broken’

Gordon Mackay feb 14 INDEPENDENT MEDIA DA spokesman Gordon Mackay. File picture: Leon Lestrade/Independent Media

Cape Town - Eskom’s application to the National Energy Regulator of SA (Nersa) for an additional price hike of 8.6 percent effectively asks consumers to pay up for the state-owned enterprise’s (SOE) poor financial planning and operational inefficiency, the Democratic Alliance said on Sunday.

“Government would do well to give meaning to assertions in today’s [Sunday’s newspaper] reports and allow for the privatisation of our power supply to make Eskom more profitable in the long run,” DA spokesman Gordon Mackay said.

Eskom was submitting an application for a regulatory clearing account (RCA) which would enable it to hike energy prices by an additional 8.6 percent over the eight percent annual increase agreed upon for the period running to March 2018. This would result in additional revenue of R22.6 billion from tariff increases.

Meanwhile, Eskom had paid an excess of R73 million in bonuses to executives and management over the past seven years.

“Eskom’s RCA is a mechanism that allows the utility to recover unexpected costs that arise while generating electricity. The costs are recovered from consumers retrospectively by adding them to the next year’s tariffs. The regulator needs to decide that these costs have been incurred prudently and have passed an efficiency test,” Mackay said.

At the public hearings on Eskom’s RCA application, the response had been unanimous in its rejection of the application. Representatives and citizens were becoming aware that consumers would ultimately pay for Eskom’s negligence and mismanagement.

Eskom had argued that its current deficit, for which the additional tariff revenue was now needed, arose from being forced to use expensive fuel for its gas turbines to keep the lights on.

“This is a dubious assertion at best as answers to parliamentary questions clearly indicate that South African energy demand is now below 2006 levels with an additional saving of 2000MW – 3000MW having being achieved during the course of 2015,” Mackay said.

It had emerged that the deficit had been largely caused by cost overruns at Medupi and Kusile, the coal-fired power plants currently being built.

“The RCA and additional price hikes will not make Eskom more financially stable or efficient – they will only push more people and companies off-grid and increase the financial risk of Eskom’s future with reduced customers and demand. If Eskom had direct competitors, it would definitely have gone out of business by now. They should not be rewarded for their inefficiency,” he said.

It was obvious that Eskom’s application should be declined by Nersa. The public and private sector had spoken with a clear and united voice – “enough is enough”.

“Now is the time for government to implement a partial privatisation of Eskom rather than the SOE having to keep on requesting price hikes to cover for poor planning and ineffective financial management. The price hike cycle must be broken,” MacKay said.

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