Prepare for more power pain
Johannesburg - South Africans need to brace themselves for more Eskom tariff increases because the most recent one was actually for the year 2013.
The power utility is going to ask for more increases for the years 2014, 2015 and this year and will probably get more than the R11.241 billion the National Energy Regulator of South Africa (Nersa) has given it.
This is according to the Organisation Uniting against Tax Abuse’s (Outa’s) Ted Blom who said: “There’s going to come a time when only a few people will be able to afford electricity.”
Eskom’s Khulu Phasiwe said Nersa required that every distributor of power submit financial reports at the end of each year so that it could assess what they needed.
The statements show that Eskom used more diesel in 2013 than it budgeted for.
Now Eskom needs to recoup that cost as well as the money it spent on IPPs.
“The laws of South Africa state that because you are a monopoly, whatever you use has to be regulated, that is why we are claiming it back,”Phasiwe said.
Read also: Eskom’s 9.4% hike could be a double whammy
According to Blom, the problem with Eskom started in 2002 when its business model was changed from a service model to a profit one.
The new model has now put the power utility under pressure to make a profit, hence these increases, Blom said.
“They are trying to squeeze it [profit] out of the public,” he said.
At the moment, a Multi-Year Price Determination (MYPD) dictates that Nersa give Eskom an 8 percent tariff increase each year for five years.
The current MYPD is from 2013 to 2018. After that, it would change to another figure, Blom said.
Despite the guaranteed 8 percent, Eskom can still apply to Nersa for the Regulatory Clearing Account (RCA).
Phasiwe said the RCA was what they had applied for to be able to recoup their funds.
Read also: Nersa cuts Eskom bid by half
Phasiwe meanwhile refuted reports that Eskom was getting 9.4 percent. He said this 9.4 percent was made up of the 8 percent guaranteed increase over five years plus the 1.4 percent it received yesterday from Nersa.
Eskom believes this is still not enough, while civil society thinks it is too much for already overburdened taxpayers.
In a statement, Eskom’s group chief executive Brian Molefe said the increase did not address the question of Eskom’s continued financial sustainability and it would have operational consequences.
He said there was now a concern for the open cycle gas turbines, which it uses to help balance energy supply and avoid load shedding.
“The recovery of diesel costs is now seriously in question with Nersa’s current decision. We will do our best to minimise the risk of load shedding, striking a balance with Eskom’s already depleted balance sheet,” said Molefe.
Minister of Public Enterprises Lynne Brown said she would study Nersa’s decision and has requested Eskom provide her with a report on what impact the increase would have on its programmes.
Brown also asked municipalities to cushion the most vulnerable against the increase and that they honour their obligations towards Eskom.
But civil society is furious, with Cosatu saying consumers are being forced to pay for Eskom’s sins.
Cosatu said the increases were too much for workers and their families who were already facing increases to personal income tax from last year and the fuel levy, as well as the rise in other basic costs.
“What is clear is that consumers can't afford any further increases in the cost of living. This will actually plunge even more people into poverty,” Cosatu said.
The Steel and Engineering Industries Federation of Southern Africa (Seifsa) and the National Union of Metalworkers of SA (Numsa) said the increase would lead to thousands of job losses.
Numsa’s general secretary Irvin Jim said: “At risk are workers in companies struggling to survive in a harsh economic climate. Jobs are already in the firing line and the tariff increase could be used as the excuse to start retrenching.
“The Chamber of Mines has already warned that if Eskom’s application was approved, 40 000 jobs could be lost,” said Jim.
- Additional reporting by Amy Musgrave