Who's going to pay our costs, asks Eskom

2012-08-21 15:46

Cape Town - Eskom is mulling the wisdom of demanding tariff increases that will make the electricity price fully cost-reflective in five years, the utility said on Tuesday.

"That is what we in Eskom are discussing at the moment," finance chief Paul O'Flaherty said on the sidelines of a briefing to Parliament's portfolio committee on energy.

"We have to balance the reality of the economy versus what Eskom needs."

The utility is due to submit its final tariff increase application to national regulator Nersa at the end of August, after receiving comment from National Treasury last month.

O'Flaherty said at the moment the average price per kilowatt hour was 60 cents but it needed to be 90 cents to cover the cost of Eskom's expansion programme and interest of about 10% on borrowings set to reach R350bn by 2015.

In response to questions from MPs, O'Flaherty was adamant that Eskom had to raise the required cash from the electricity price.

"Who is going to pay for it if it is not in the tariff?" he asked.

Following electricity price increases of 31% in 2010, and then 16% in the past two years, Eskom's next tariff hikes are anxiously awaited.

The utility has refused to comment on reports that leaked documents reveal it will now demand annual increases of between 14.6% and 19%.

Earlier this month, Nersa's Thembani Bukula indicated the regulator was receptive to argument that the price needed to become cost reflective by 2018, the end of the five-year period covered by the MYPD3 tariff application.

But he said outstanding variables would play a role in determining the increases this would necessitate.

"We have done our own calculation of what the price increase needs to be, to be cost-reflective. Our own model gives us an impression but we need certain inputs from industry."

Nersa will announce its final decision in February, following an extended period of consultation and public hearings.

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  • eugene.meyer1980 - 2012-08-21 15:56

    How about you pay it with those fat bonuses to the useless board of directors???

      robin.stobbs.9 - 2012-08-21 16:08

      And bring to book all those who steal electricity - sort them out and there will be no need for increases for years to come!

      blignault.michaele - 2012-08-21 16:19

      Hear, hear Eugene

      jerolan.gengiah - 2012-08-21 16:19

      How about you actually work for your salaries, be efficient, do not take fat BONUSES. Do not make us pay for your incompetence

      hermann.hanekom - 2012-08-21 17:31

      Their salaries are so big they can afford it, but what about pensioners and the poor?

      elmariebarnards - 2012-08-22 01:46

      What about al the parties as well. With all the money from parties and salaries and the stealers, I think electricity can become cheapper. Just for the record Eskom

      lynne.shone.31 - 2012-08-22 04:43

      While they are at it how about collecting their debts. Goverment especially and municipalities owe Eskom billions. What about the power we send over the boarders - are Zimbabwe and Swaziland up to date with their payments? I would be very supprised.

      deabreu - 2012-08-22 07:50

      Actually Eugene, I know someone who was "on the inside" and what he told me was shocking, the top fat cats within Eskom own "companies" that supply Eskom with the supplies at inflated prices! However, I never hear about this in the news. Hush hush stuff. We pay premium prices to start with!!

  • colin.taylor.9883 - 2012-08-21 15:56

    Why dont you stop paying out BONUSES to your incompetent Board and staff?????

      armand.horn.58 - 2012-08-21 17:59

      Didn't Escom post a huge profit in the beginning of the year?? Why the increase?

  • leonard.rom.7 - 2012-08-21 15:58

    how r u going pay the people of south africa back in damages that u caused in all your load shedding and power cuts

  • timothy.whyte - 2012-08-21 15:58

    WTF I already pay over R1.00 a kilo watt at home

      timothy.whyte - 2012-08-21 16:02

      Why do we have to suffer for eksdom to give zimbabwe and other neighboring coutries subsidised rates of 26 cents a kilo watt ??????

      bheki.dingiswayo - 2012-08-21 16:02

      Same here

      blignault.michaele - 2012-08-21 16:21

      @ alan A unit of measure [rheutorical], except the Escom's kilo gets heavier each year

      raymond.romans.5 - 2012-08-22 08:09

      Whose volt is it that we're in this predicament anyway?

      konstabel.koekemoer - 2012-08-22 09:29

      @Timothy, 60c is the wholesale rate that Eskom charges the municipalities, they then add their own margin which has often been increasing at a higher rate than the Eskom increase.

  • larry.piggott1 - 2012-08-21 16:06

    Horsecrap, the incompetence, corruption and inefficiency is chewing the money up. Bring in professional accountable management and the price could actually go down instead of up.

  • WarrenStylin - 2012-08-21 16:06

    They should start a game show called "Bend over SA" their slogan will be "How much you can take"

      gareth.perkins.52 - 2012-08-21 16:26

      HA HA HA HA HA

  • frans.visserdsb - 2012-08-21 16:11

    so... they raise the rates to recover the costs of this R350 billion expansion project, and say the rates have to be ├žost reflective'in five years. Does this mean the capital investment will be fully amortised over 5 years? In which case they will have an overrecovery of R70 billion (give or take, not taking into account the cost of capital) per year after that? I assume they are issuing 5 year bonds? so will we have a reduction of approximately 33 cents per kwh (based on a current consumption of 215 kwh, not taking into account the additional consumption by 2015 due to additional capacity) in our rates? somehow i dont think so...

      brian.exmachina - 2012-08-21 17:23

      Also, I'm no mathematical genius, but if the average person now is supposedly paying 60c per kwh and they'd like them to pay 90c per kwh after 5 years, how on earth are they getting to increases of between 14.6 and 19%? Last time I checked 8.5% per year gets you from 60 to 90. So why do they want double that? Year 1: 60 -> 65.1 Year 2: 65.1 -> 70.63 Year 3: 70.63 -> 76.63 Year 4: 76.63 -> 83.14 Year 5: 83.14 -> 90.20

      wehrner.kohn - 2012-08-21 20:42


      colin.rehbock - 2012-08-21 22:08

      WTF I am on prepaid and pay R1.31 per KWH> Am I missing something here or what. (I have passed woodworking in Grade 12)

  • pearl.gaitskill - 2012-08-21 16:18

    What if the board of directors took a 10% cut in their salary, instead of forcing those barely living above the breadline to live in darkness?

      nicolaas.baker - 2012-08-22 14:13

      @Pearl, how about not paying these thugs nothing, charging them with national theft agains the consumers, reposses all their stolen assets, re-claim back the non earned bonusses, freeze their bank accounts and reclaim all the stolen money, no pension payouts to these bastards! Then there will be enough money to finance their expansion programme, supply cheaper electricity and every body will live happily afterwards?

  • Jacques - 2012-08-21 16:22

    The answer to that wuestion I'd painfully obvious, idiots. You, yourselves! Take every bonus, party, conference, unneccessary plane ticket or whatever and put that money towards your actual goal and voila!

  • michael.i.wright - 2012-08-21 16:22

    Cut the bonuses paid to incompetent fatcats, crack down fully on illegal power connections that are ripping off huge amounts of power, stop blowing hugely expensive turbines to bits through incompetence. I guarantee you'll balance the books nicely.

  • i.see.a.cupcake - 2012-08-21 16:23

    The ANC should... their is your answer now leave me alone.

  • fanie.hugo - 2012-08-21 16:27

    i think we must make eskom a non profit that way all pay the same and they dont spent ouer money on their own thinking of pleasure.give all shares to the govermant to supply all of us fair.!!!

  • leonard.rom.7 - 2012-08-21 16:27

    i wish i could run a business like eskom no service maintainces no servive delivery, and milk all the south africans to pay more!thieves !!!!!!!!!!!!!!!!!!!!

  • conrad.marshall - 2012-08-21 16:32

    how about ESKOM stop charging heavy industry and factories in SA discounted rates, and let them pay a premium for their usage, also stop exporting electricity to our African neighbours at the same ridiculous low discounted rates.... ESKOM's system of pricing to the average citizen in SA is criminal, as WE support these industries!!!!

  • raymond.kok3 - 2012-08-21 16:33

    stop having parties and dont take a bonus for the next five years thats how you can pay for your costs ,and take a drive trough the squater camps and see how much you can save

  • mark.vanderheever - 2012-08-21 16:35

    How about you start saving and not spending money on extavagant parties as you did!

  • rowan.maulson - 2012-08-21 16:38

    I'm already paying more than 90c per Kwh for electricity therefore you can stop bloody increasing the cost to me...

  • TdJ01 - 2012-08-21 16:39

    Open the market to competitors, you lot are like Telkom monopolising the market but suck at it!!

  • judith.taylor.56 - 2012-08-21 16:49

    Please remove him and replace him with someone who understands how to run a business. Raising prices and crippling the economy does not solve the problem. Keeping tariffs affordable so that the economy can grow and the demand for electricity can also grow makes far more sense.

  • deon.oberholzer.90 - 2012-08-21 16:53

    Maybe you should stop selling cheap electricity to businesses, neighboring countries and giving out free electricity. I'm already paying R1.20/kwh how much more do you expect me to pay?

      palu.jon - 2012-08-21 17:20

      R1.80!! IT'S STILL A BARGAIN!!!

  • triumphant.voice.58 - 2012-08-21 16:58

    This is the post 1994 SA remember. The economy is structured in such a way that the top 10% paying tax pays for the 90% that won't, can't or don't and by don't I mean run cable for their neighbors....

  • thepatrickwinter - 2012-08-21 17:10

    Double edged sword to remain in power. Allow affirmative shopping with the electricity on the one hand and our cronies across the border and occasionally squeal about it for the ears of other hand and then try and passify the other hand by discounting an already agreed upon increase.

  • josedenobrega2 - 2012-08-21 18:06

    I got 725.5 KWh for R1000.00 on my last household electricity purchase that equals R1.38 per KWh so can someone please explain to me how this article can talk about 60c who is making more than eskom in between? Are we consumers being sold out by bad governance? Please explain to us how this works in detail!

      Thebigguyjim - 2012-08-22 06:23

      Jose. Your Metro or Council has a massive mark up.

      sheralee.jones - 2012-08-22 08:42

      They are talking about 60c is in only certain areas (also affected by municipal hikes on top of that) and is also related to the amount of electricity you use. The more you use, the more you pay.

  • Johan De Beer - 2012-08-21 18:11

    I need to expand my business so I can make more profit. Who's going to pay my costs?

  • IcemanGP - 2012-08-21 18:12

    We are already paying frigging 90c per KW/hr in Joburg.

  • snarf.noodle - 2012-08-21 18:33

    These obscenities has to stop - where some useless CxO demands a salary that is the total sum of some hard working similar being's earnings - God did not create litle god's and the rest - get rid of them - companies only ran well with them while the going was good - when times are tough the ones out of work is the ordinary folks not these visionless morons!

  • willem.dehaan.94 - 2012-08-21 18:34

    I wonder what percentage of the costs is made up by the exorbitant and undeserved paychecks the directors and top"management" of Eskom give themselves? And what about the costs of their mismanagement - do they pay back the losses they have caused and are causing? I doubt it.

  • valcooperRSA - 2012-08-21 18:47

    Cut the bonuses...cut the fat cat salaries..... cut out the share holders profits....cut out the jolling parties....get real.....where will it end...will they be happy when R100-00 buys 25 units.....why wait to increase put us out of our misery now ...escom is killing us....just like every other good thing this country had it's now going down the toilet........

  • sp.gerber - 2012-08-21 18:53

    its not 60 cents !!! it more than R1/kwh - look at the block tariffs only the first 50 kwhs are 60c - then is goes up to R1.30!!!

  • sp.gerber - 2012-08-21 18:56

    60c/kwh ? we don't buy at LPU tariffs!!!

  • flysouth - 2012-08-21 19:25

    It is estimated that 40% of all electricity used is never paid for - illegal connections are rampant in SA in black townships. E-TV did their own snap survey a while ago - out of 10 homes visited at random in Soweto only ONE had a legal connection for which the occupants were paying! In addition there is a massive scam going on with pre-paid vouchers for electricity - that is an inside job by corrupt Eskom employees. Obviously there is no political will in the ANC and Eskom to enforce the law and thereby bring electricity pricing to an acceptable level as they would achieve if they stopped this massive theft of electricity. Or should we call this 'redistribution by other means'?

  • Sharon - 2012-08-21 19:52

    Stop paying out profits and big bonuses. That money should be enough.

  • - 2012-08-21 20:20

    Eskom , don't make your lack of planning our emergency !

  • wehrner.kohn - 2012-08-21 20:30

    Municipalities or bulk distributors make more than Eskom on electricity, that is why you pay now more than R1.50 in CT. When are we going to get access to smart meters, so that we can use the grid as a battery and produce cheaper electricty than eskom and municipalities?

  • johan.vanwyk.5 - 2012-08-21 20:33

    What will happen when all dept is paid, will prizes come down or will more be demanded to line peoples pockets who is overpaid already?

  • jacques.swanepoel.372 - 2012-08-21 20:35

    Start with the guys stealing, cut your bonusses ...

  • markmc83 - 2012-08-21 20:39

    Stop giving free/cheaper electricity to half the population. Stop the electricity thieves. Stop wasting money. Electricity is really becoming an exorbitant expense for the middle class. The main reason it's so expensive is due to the gross mismanagement of Eskom.

  • barend.wasserman - 2012-08-22 04:15

    "We have to balance the reality of the economy versus what Eskom needs." Stop having parties and getting big bonuses you twit....

  • herbert.plessis - 2012-08-22 07:21

    And how about using those double cabs a little longer instead of buying new ones all the time? and how about lessening the overtime pay. If you signed up as a powerlinesman, after hours work is de jour.

  • Ngcebomusa Phungwayo Ka Mlotshwa - 2012-08-22 07:42

    Electricity is slowly becoming a luxury in SA. Can Eskom stop paying management ridiculously high salaries and bonuses and use that money to sort out its 'business'.

  • jasen.carter - 2012-08-22 07:56

    Maluzi Gigaba in his halting speech asked for partnerships with electricity users and commitments to reduce usage. Why are the partners carrying the load here? How about Eskom commit to no staff parties, bonuses and rewards and public communication of purchases and costs until they have met the goals required to supply the utility we are paying for. Where have you heard that a penalty is put on spending too much on a product??? How do these incompetents do business? I have passed several "Informal communities" that even Eskom are calling "Wire Cities" that are blatantly stealing power. Go get your money there mr O'Flaherty and stop making your problems mine.

  • alex.richards.94064 - 2012-08-22 07:57

    Where is the money that was loaned from Germany... spent on cars, parties. Learn to cut costs like we all have to do.

  • sheralee.jones - 2012-08-22 08:40

    You can't take blood from a stone. I have prepaid electricity and if I can't afford electricity then I won't buy electricity. Then I guess Eskom will lose their 'increases' in another sense. I think the government also needs to consider how all of this will have a knock-on effect. . .mining, industry. There's more people paying tax in this country than ever before - where is this money going???? Maybe the R35 million spent by govt on chartering flights could've assisted the general public . . . but it's help thyself first and forget about the consequences of your actions or maybe how saving money there could've generally benefitted the country elsewhere. These people don't think further than their noses...

  • sheralee.jones - 2012-08-22 08:45

    The joys of an inept government, being in a developing country in a poor economy...

  • brendan.vogt.1 - 2012-08-22 08:45

    Firstly, stop supplying our your mates next door OR charge them your inflated rates. Secondly, cut back on those Exorbitant Bonus's you dish our so freely every year, And lastly, stop give free elecricity to one and all in our country and make them pay for it.

  • eyesears.handsfeet - 2012-08-22 09:04

    Who is going to pay for it if it is not in the tariff?" he asked. Where is your kitty of capital? You have more than enough for parties and high salary increses. Or is your plannig so poor that the tax payer need to pay more and more and more. Where will it end? Eskom taking 50% of one's nett salary by the time you are done hicking the tariffs all the time? Somewhere it needs to stop! You are killing the tax payers.

  • phillys.winterbottom - 2012-08-22 10:19

    O'Flaherty, use some of that Irish intelligence and ask your scumbag paymasters to start paying back the bilyooooooons they have stolen whithout even a smack on the wrist!!!! then u can use this to fund your expansion instead of funding the flabby waistlines of the elite comrades.

  • ngoako.mathekga - 2012-08-22 10:49

    Solar is the solution here, bye bye Eishkom!

  • dylan.mugabe - 2012-08-22 12:20

    56 million on staff parties in 2011. Start there.

      sue.grove.186 - 2012-08-22 15:53

      Its outrageous the ongoing corruption and lack of ability to do a days REAL work. Bunch of incompetant people who should not be in these jobs, as for the executives-how dare they draw these huge salaries-we the taxpayers are be sucked dry-It has to stop- I think the taxpayers should refuse to pay tax!!!

  • murray.campbell.980 - 2012-08-22 14:34

    I have just came back from China and I was shocked to see how much the family there pays for electricity.. what Eskom charge me in 2 months they can have electricity for a year. We are already very expensive and it is leading to cut backs in my business. I want to be on the board of directors at Eskom, it is easy peasy, just hold out your hand and say 'gimme my money', I would love to see what they constiture as 'public hearings' on this matter

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