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Eskom pushed consumers to electricity price ceiling - Safcei

Apr 17 2018 17:28
Carin Smith

Cape Town - South African consumers have reached a price ceiling in terms of electricity tariff hikes, according to the Southern African Faith Communities' Environment Institute (Safcei).

Kim Kruvshaar, an independent sustainability auditor, represented Safcei at public hearings by the National Energy Regulator of South Africa (Nersa) in Cape Town on Tuesday. The hearings relate to Eskom’s application for claw-back tariffs amounting to R66.6bn.

Nersa is holding public hearings into the matter for the next three weeks.

Kruvshaar explained Safcei aims to use democratic and and non-violent means to promote decisions in the interests of socioeconomic justice and sustainability.

The organisation rejects Eskom's revenue claw-back application, and sees the application process as "an outdated model of an inefficient monopoly".  

"We don’t believe Eskom is an efficient electricity provider. Its business model is out of sync with global trends," Kruvshaar told the Nersa panel.

Safcei regards the state-owned power utility's decision to keep its old coal power plants operational as one such example of an outdated and costly decision.

"Plant breakdowns at these (old coal) plants show how inefficient they are, and expensive use of diesel then has to be used as back-ups. There are also cost overruns with new plants like Medupi," Kruvshaar said.

The costly impact of corruption at Eskom is another issue raised by Safcei.

Kruvshaar emphasised that increasing electricity tariffs leads to reduced consumption.

"While we acknowledge that government has increased electricity availability in the country, many people are not able to pay for electricity and then municipalities in turn battle to repay Eskom," she said.

Energy haves and have nots

"Municipalities are trapped as they are not allowed to buy electricity elsewhere. Rising Eskom tariffs mean increasing hardship and increasing disconnection for cash-poor households. The cost of electricity creates energy haves and have nots."

On the other hand, Safcei sees affordable electricity as an enabler to promote improved health, education, security and economic independence.

"When electricity becomes unaffordable, it has a devastating effect on the entire South Africa. We ask Eskom to switch from a vicious cycle to a virtuous one," said Kruvshaar.
"Eskom needs to reduce its costs and grow its sales to move to an efficient rather than punitive tariff level. Its current demand and sales forecasts are flawed, in our view."

Eskom's history of sales going down as electricity prices go up clearly reflects the sensitivity between price and consumption, according to Safcei.

"Stop repeating the same pattern and expecting different results. If Eskom keeps putting the price up, it will continue to get less consumption," said Kruvshaar.

She added that the country is ranked 113th (second last) on a global effective energy transitions index.

"Calls to restructure Eskom continue. This is essential to establish a sustainable electricity service in South Africa," she said.

Support restructuring, don't hike tariffs

Safcei called on Nersa to refuse Eskom's application for a regulatory clearing account (RCA) tariff increase and to support the restructuring process instead to ensure an efficient, sustainable and affordable electricity supply.

"We appeal to Nersa to direct Eskom to approach its shareholder (the government) in order for it to investigate electricity service provision models that provide affordable and sustainable electricity services," said Kruvshaar.

"We appeal to Nersa to conduct or oversee an independent study into pricing models that also make provision for basic affordable electricity for vulnerable people."

She referred to what she called "people with a vested interest in coal" and said workers in the coal industry should rather be reskilled to work in the renewable energy sector.

"The future should be based on a range of renewable energy. For South Africa to lag behind in this area would mean the country continues to have inefficiencies in the energy industry and tariffs consumers cannot afford," said Kruvshaar.

"Yes, the economic downturn made it more difficult for consumers to pay for electricity, but there are also issues of inefficient costs at Eskom - like old coal plants."

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