The Eskom problem won’t be helped by higher prices

OUTA calls for the 10% electricity price increase to be blocked and replaced by urgent attempts to provide solutions for the Eskom crisis.

“We don’t believe that the 10% increase should be allowed. This is on top of the money that we are giving them as a bailout,” says Liz McDaid, OUTA’s Parliamentary and Energy Advisor.

“NERSA has basically done what it normally does, which is simply look at both sides and take the middle: 10% instead of 20% which Eskom wants, or 0% which the public wants." McDaid describes this as a "pick-a-price" solution, which was again delivered with the reasons still awaited.

"NERSA needs to be applying its mind. We ask for nothing more than inflation,” she says.

McDaid says that Thursday’s Budget gave some tax relief which was supposed to help keep the cost of living from rising too sharply, but this electricity hike will impact on the cost of living and undermine those gains.

“It is also unclear whether Eskom will get further increases pending the resolution of all the claw-back cases that are ongoing, and that could put the price up even more,” says McDaid.

OUTA calls for Eskom to be addressed as a national crisis. South Africa cannot afford for this entity to collapse, but equally consumers – individuals and businesses – cannot afford to lose access to basic services that are increasingly priced out of reach on top of annual government bailouts.

Simply hiking the electricity price is not the solution. Transferring  Eskom debt to government is also not the solution and does not make the cost of servicing the debt go away.

This requires Eskom, the Ministry of Public Enterprises and the Ministry of Mineral Resources and Energy to work together, in the same direction.

The recently published draft Electricity Pricing Policy and Electricity Regulation Amendment Bill have problems but are moves in the right direction.

OUTA suggests that Eskom and its shareholder, the government, work on the following:

1. Move ahead with restructuring Eskom.

2. Move ahead with unbundling Eskom.

3. Unbundle Eskom Generation speedily.

4. Sell off non-core assets.

5. Sell off some core generation assets to repay debt.

6. Take on non-government shareholders to recapitalise the entities with non-government equity to help pay back debt.

7. Sell off core loss-making distribution assets, for example, in Soweto and other poorly performing areas, to those who can do things better, to reduce losses and raise money to pay debt.

8. List the unbundled entities on the JSE to take on non-government shareholders, raise capital and reduce debt.

9. Improve procurement to reduce waste, and cut corruption and maladministration.

10. Reduce the staff head count and remuneration, and improve efficiency and productivity.

11. Replace poorly performing plant with least-cost new plant (wind and solar energy, and flexible generation capacity).

12. Reduce electricity theft and non-payment.

13. Improve revenue collection and reduce arrear debt, particularly from municipalities. 

14. Reduce cable theft and vandalism through better asset protection.

15. Implement more effective maintenance.

16. Ring-fence the carbon tax and electricity levy on coal-generated electricity paid by Eskom to government and use this towards improving energy efficiency and off-grid electricity.

17. Use the electrification grants to Eskom and municipalities to provide off-grid electricity to households. 

Soundclip

A soundclip with comment by Liz McDaid is here.