Johannesburg - Trade union Solidarity asked the National Energy Regulator of South Africa (Nersa) to send Eskom back to the drawing board regarding its planned tariff hike.
"Testimony at the public hearing has so far shown convincingly that a 35% increase over the next three years cannot be absorbed by the public and the economy.
"If Nersa went ahead and granted the 35% increase, the regulator would make a mockery of the public hearings and lose its independence as regulator," Solidarity said in a statement.
Nersa has been holding public hearings into Eskom's proposed tariff hike around the county for the last week and is set to wrap up proceedings on Friday this week.
Eskom has asked for a 35% price increase in each of the next three years after adjusting its original application for a 45% price increase for the period April 1 2010 to March 31 2013.
The power utility needs to raise as much as R500bn for its power expansion programme and while it has already received some funding from the South African government and overseas banks, it is still anticipating massive shortfalls.
If the 35% increase is granted, it will be the second-biggest tariff increase that Eskom has had in more than 40 years.
But so far those making presentations to Nersa at the hearings have warned of the huge economic impact the tariff increases would have on the economy and jobs.
Solidarity is proposing that Eskom should come up with a new financing model for its expansions.
"The model that makes excessive use of tariff hikes to finance expansions was convincingly rejected by the public," said Solidarity deputy general secretary Dirk Hermann.
Alternative financing
According to Solidarity, Nersa cannot approve the 35% increase and they also cannot approve a lower increase without alternative financing plans for financing the expansions.
"The electricity regulator cannot, therefore, be ready to make a ruling in February. Eskom needs to go back to the drawing board. This matter is of such importance that a hasty decision cannot be made if Eskom's presentation is deficient," warned Hermann.
In its presentation to Nersa, Solidarity suggested that Eskom adjust its loan formula so that more money could be borrowed.
"Eskom is a lower risk business operating in a monopoly environment. Its tariffs are protected and it has a stable shareholder. All of this makes it possible for the company to incur more debts and pay off the debts over a longer period. This would provide relief to consumers," Solidarity said.
The trade union has also suggested that Eskom's shareholder, the South African government, take responsibility for obtaining the necessary extra loans or share capital.
"The state can reduce the impact on the tax payer by financing it over a longer period. Such a step would also neutralise the risk of a weaker credit grading. Eskom's new asset valuation model has anyway led to a radical increase in Eskom's balance sheet, which should increase its creditworthiness," it added.
In terms of the Solidarity model, Eskom would still be under pressure over the next three years, but there would be huge relief in years four and five, with Eskom profits of up to R85bn in years five and six.
"It is therefore not necessary for Eskom to finance its capital programme over six years. The financing can be done over a longer period," said Hermann.
- I-Net Bridge