Black Consumer Council calls on Nersa to block tariff increase

THE NATIONAL Black Consumer Council (NBCC) has called on the National Energy Regulator of South Africa (Nersa) to reject Eskom’s application for a 19.9 percent tariff increase in the 2018/2019 financial year. NBCC secretary-general, Raynauld Russon said yesterday that Nersa should decline the application, because the power utility had not demonstrated how it would contain its costs.

“Eskom has dismally failed to convince us that it has put sufficient effort to manage its escalating costs and has failed to provide a cost containment strategy,” Russon said. “As a public entity that has been operating under a shadow of state capture and corruption, it is imperative that the utility must convince consumers that indeed it has adequate anti-corruption, anti-fraud and effective cost-containment strategies.”

Eskom has applied for a total allowable revenue of R219.5 billion, which translates to the 19.9 percent tariff increase. However, if the application is approved, municipal customers will pay 27.5 percent more for electricity with effect from July 1 next year.

In its application, Eskom said 46 percent (R28.3bn) of the operating costs was attributable to employee benefits, while maintenance accounted for 29 percent (R17.7bn) of the costs. The utility said its total labour costs escalations over the last five years had tracked the market escalations. Eskom said it expected maintenance costs to escalate, because of the acceleration of its maintenance programmes. “Eskom will ensure that maintenance is carried out prudently and efficiently,” Eskom said.

Russon said Eskom failed to demonstrate how it would control the runaway costs of the Independent Power Suppliers (IPPs) which are estimated to increase by 5.5 percent.

He said the requested tariff increases were unaffordable. “Consumers are in financial distress at the moment and they carry a heavy debt burden. They cannot therefore spare any extra money for increased electricity tariffs. If the tariff hike is approved; consumers will be expected to pay municipalities in excess of R2kW/h which is exorbitant by world standards. It would translate to more than R4 000 for an average home per month. This is unacceptable.”

Russon said electricity should be priced “correctly” in order to attract foreign direct investments and job creation. “It is also a factor in the quality of life and poverty alleviation. The proposed tariff increase seems to be adversarial to government efforts to reduce poverty,” he said.

NBCC has also added its voice in the mounting municipal debt facing Eskom. Russon said Eskom had “mismanaged” the Soweto debt. “We therefore propose that this debt be written off as a bad debt and new processes be initiated to find a special dispensation for Soweto,” he said.

Eskom this week ruled out canceling the municipal debt, with spokesman, Khulu Phasiwe saying the move has not worked in the past. Eskom’s total municipal overdue debt at the end of August was more than R11.2bn.

Meanwhile, the Energy Intensive Users Group, a nonprofit association of energy intensive consumers whose members account for more than 40 percent of the electricity consumed in South Africa, will soon make it submission on Eskom’s application to Nersa, it said yesterday. The body is also likely to oppose a hefty tariff increase.