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Nersa process 'dysfunctional'

Jan 22 2010 15:38

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Johannesburg - The process used by the National Energy Regulator of SA (Nersa) to determine Eskom's tariff hikes was now deeply flawed, a number of speakers told a public hearing on Friday.

Addressing the final day of Nersa's hearings in Midrand on the electricity parastatal's tariff application for an incremental 35% increase over three years, independent academic Mike Muller said that the process was now also "unreasonably constrained".

"The correct alternative would be for Nersa to return the matter for a political decision," Muller said.

Congress of SA Trade Unions representative Dumisani Dakile also criticised the process saying loudly: "I don't believe these are public hearings. Only Nersa is able to engage the speakers, not the public."

He said last year Nersa had heard and received around 170 submissions, however the price hike was granted "against the majority view".

"It is just a process," he said indicating that Nersa's attempts to encourage public debate were merely window dressing.

He also criticised why Eskom had been given an opportunity to address the hearings first, and then at the end of proceedings.

'Failed to provide sustainable pricing'

"They have been given a double bite while we have been given a single bite," Dakile said to laughter.

Du Toit Grobler, representing both the SA Pulp and Paper Industry as well as the SA Institute of Electrical Engineers also added his views.

He questioned why government "whom many speakers have said should be more involved in Eskom's running" had not been present in the audience or to make submissions.

Muller said that if Eskom adopted the same approach as the country's water sector, it would not need a tariff increase.

"But historical mistakes have been made. Electricity was priced by Nersa for surplus when the sector clearly moved into scarcity.

"Prices made no provision for new capacity and short term thinking was applied to a long-term process," Muller said.

Furthermore the crisis had been caused by government's policy failure.

There was also the case of regulatory failure, Muller added, as Nersa had not identified obvious trends and threats.

"Consequently it failed to provide sustainable pricing."

Muller recommended that government recognise and financially compensate for incorrect policy and regulatory decisions.

"This could be done through a capital grant and only then should pricing for future scarcity begin."

Political guidance required

Muller added blatantly that the current process was "dysfunctional".

He said there had been new developments since Eskom filed its application such as part privatisation of power generation.

"But public interest implications have not been adequately publicised, analysed or consulted."

Muller added that specifically the competitive issues of ad-hoc part privatisation had not been given attention.

"Political guidance is required. Nersa is not competent to make a decision," Muller stressed.

He added that it would be appropriate for Nersa to recuse itself from decisions around Eskom.

"A direct political decision has to be made in the national interest," he said.

- Sapa

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