Adapt: Eskom should restructure itself to become more resilient in a fast-changing energy sector and support the global energy transition, Salga electricity expert Nhlanhla Ngidi told a public hearing by the regulator. Picture: REUTERS
Adapt: Eskom should restructure itself to become more resilient in a fast-changing energy sector and support the global energy transition, Salga electricity expert Nhlanhla Ngidi told a public hearing by the regulator. Picture: REUTERS

Eskom’s proposed 27.29% tariff increase for municipalities in 2018 was "unaffordable and indefensible", the South African Local Government Association (Salga) told the National Energy Regulator of SA (Nersa) at the public hearings into Eskom’s tariff application on Monday.

Salga’s members include metros and municipalities.

Eskom’s existing tariff agreement ends on March 31 2018.

The regulator applies a detailed methodology in assessing Eskom’s application and has frequently slashed the tariff requested on the basis of inefficiencies in Eskom and what is considered allowable revenue.

On the first day of the hearings, Nhlanhla Ngidi, Salga’s electricity expert, expressed doubt over the validity of the large increase request.

Previously, Eskom had done the same but when its requests were not granted, the utility had survived, he said. In its last five-year tariff application, the utility was granted half of the 16% increase it had asked for.

"Nersa must not allow Eskom’s inefficiencies to be passed on to the consumer," Ngidi said.

He said a long-term pricing approach had to be adopted in which prices were gradually increased, which would allow markets and interested parties to adjust accordingly.

Besides the 27.2% proposed tariff increase for municipalities, Eskom is applying for a 19.9% average tariff increase. Nersa allowed only a 2.2% price increase for 2017-18 on the previous year.

Ngidi said that Eskom’s application had overestimated what independent power producers would cost it and had made projections on projects that would only be online in about two years.

Every Eskom increase was costing SA "more to cross-subsidise the poor", Ngidi said.

Salga also says that Eskom’s R30bn depreciation allowance for one year should be reviewed, as it is exorbitant.

"Eskom needs to restructure itself to become more resilient to a fast-changing energy sector and to take the board on the transition that is happening globally," Ngidi said.

He added that Eskom mentioned no systemic changes to provide affordable electricity.

The hearings, which began in Cape Town and will later move to other provinces, are scheduled to take place over the next three weeks.

Many submissions that oppose the Eskom application have been lodged.

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