Eskom’s repeated threat that it won’t be able to keep South Africa’s lights on if it does not get excessive tariff increases amounts to blackmail. That view forms part of a submission by the Organisation Undoing Tax Abuse (Outa), made during consultations with the National Energy Regulator of South Africa (Nersa) in response to the power utility’s latest tariff application.
Eskom is seeking an increase of 20.5% for the 2022/2023 financial year, around four times South Africa’s average inflation rate over the last decade.
Outa parliamentary and energy advisor, Liz McDaid, said the rules that allow Eskom to constantly apply for and receive additional tariff increases were based on “reasons that in general fail to stand up to scrutiny”.
McDaid said Eskom’s implied reasoning of, “If we don’t get an increase, the lights will go out,” appeared to civil society to amount to blackmail. This is an unsustainable approach,” said McDaid. It is difficult to understand how Eskom could hope to impose such a large percentage increase on to its customers.
“In essence, what Outa takes from this is that Eskom is not focused on providing electricity to enable all South Africans to grow but is only focused on providing electricity to those wealthy enough to pay the ever-increasing bills.
McDaid asserted that Eskom’s business interests could not be allowed to jeopardise economic recovery, and it was actually in Eskom’s interest to grow the economy to spur electricity sales. Outa also criticised Eskom’s defence that the price increases were driven by two factors outside its control, namely the environmental levy and the carbon tax.
The organisation pointed out these were directly linked to Eskom’s continued use of coal-fired power stations.
“Eskom presents the renewable energy IPPs as a burden, without acknowledging the climate crisis and health burden linked to coal,” Outa said. In 2011, Eskom refused to sign up Independent Power Producer (IPP) renewable energy projects and instead invested in new coal plants.
Outa warned the current pricing application continued to focus on increasing the amount of coal and the need for coal-related expenditure.
Therefore, it called for further scrutiny by Nersa, particularly given that coal contracts had formed part of the utility’s corrupt dealings. McDaid said Outa was optimistic about Nersa’s “invigorating approach” to engage with all stakeholders on the tariff application.
However, she underscored “the proof was in the pudding” over whether such engagements were meaningful and not merely held for the sake of public participation. The organisation called on Nersa to grant Eskom a maximum inflation-based tariff increase for the next financial year.
Outa said Nersa losing several legal challenges brought by Eskom against its pricing decisions in recent years indicated “regulatory weakness”.
It called on Nersa to take the following steps:
Apply a “heavy-handed regulatory approach” to Eskom to minimise the negative effects on the economy and reduce the cost of doing business.
Validate the assumptions used in Eskom’s application.
Request a written commitment from Eskom to comply with regulatory and governance parameters.
Watch over Eskom to block any self-created “emergency” procurement of coal, which benefits certain entities at the expense of electricity users.
Outa also called on Eskom to “demonstrate that it has learnt from its previous pricing applications and how it will reduce the need for top-up applications”.
Source: mybroadband
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