DA rejects Eskom application for tariff increase
The application is based on the utility’s bid to have the National Energy Regulator take into account R27.2bn in underrecoveries and unforeseen costs
The DA has strongly rejected Eskom’s application to the National Energy Regulator of SA (Nersa) for a tariff hike.
The party was joined by Agri Western Cape, energy expert Ted Blom and the SA Faith Communities Environment Institute (Safcei) in rejecting Eskom’s application for Nersa to consider a R27.2bn adjustment to its finances for R2018/2019, which if granted would translate into a tariff increase over the next few years.
The application was made in terms of the regulatory clearing account (RCA), which allows for Nersa to take account of unforeseen costs and underrecoveries.
DA mineral resources and energy spokesperson Kevin Mileham and several other organisations presented their arguments in Cape Town during the first leg of a nationwide series of public hearings by Nersa.
Mileham said Eskom was wanting consumers to pay 10-15% more for electricity, followed by tariff increases of 50% over the next few years despite the fact that the country experienced over 418 hours of load-shedding in 2019 alone.
"Consumers simply cannot afford Eskom’s proposed tariff increases," Mileham said.
"The utility has been entirely unable to demonstrate that they can operate prudently and efficiently, with gross financial mismanagement and procurement processes that have not been competitive enough. Eskom has demonstrated that it is wholly incapable of managing SA’s electricity supply. To allow an increase in the rate of their tariffs would only reward them for their failures."
Mileham stressed that Eskom had not been prudent and efficient in its management, criteria which Nersa must employ when evaluating its RCA application. There had massive been cost overruns in its build programme for new power stations and coal procurement had been plagued by mismanagement and corruption.
"We can no longer condone the entity’s inability to govern itself, maintain its plants and ensure a consistent, reliable supply of electricity. Hard decisions need to be taken at Eskom. Among these are a comprehensive review of staff needs. According to some reports, Eskom is overstaffed by as much as 30% in comparison to similar entities."
Agri Western Cape CEO Jannie Strydom highlighted the negative effect a tariff increase would have on the agricultural sector, pointing out that more than 5.5% (R8.68bn) of total farming input costs were spent annually on electricity.
"Should Nersa approve Eskom's proposal for a 16% tariff increase this will result in net farming income decreasing and may pose huge risks for the sector and national food security," Strydom said.
Safcei energy consultant Kim Kruyshaar also urged Nersa not to approve Eskom's application "as we believe the shortfall is based on inaccurate demand projections and structural inefficiencies within Eskom. It is unreasonable for citizens to continue to pay for an inefficient electricity service. Nersa should review the purpose of the RCA system in the current situation and consider deregulating it as it is being used to justify an additional tariff increase each year."
Blom also believed that it was unconstitutional and unethical to expect consumers to pay for retrospective price increases through the RCA mechanism.
Salga head of energy and electricity Nhlanhla Ngidi said the association estimated that only R8.5bn of Eskom's R27,2bn claim was justifiable and believed that the RCA was causing chaos in terms of the predictability of prices.