Taxpayers ‘subsidising power-hungry industry’
Academic wants big guns to pay premium to compensate for years of below-cost tariffs
EL E C T RI C I T Y- GUZZLI NG industries have been subsidised by taxpayers through below-cost electricity tariffs and should now pay a premium to compensate, University of Cape Town academic Hilton Trollip told Parliament yesterday.
Addressing a public hearing on the proposed conversion to equity of a gover nment loan to Eskom of R60 billion and a R23bn cash injection, Trollip said this amounted to an appropriation from the national coffers of R83bn – more than half Eskom’s revenue last year and more than the entire primary health care budget of R77bn.
“They’re not asking for a little topup,” the UCT senior energy researcher said.
It was a “horrible” thing to have to do but, because Eskom would otherwise be unable to complete its critical new power plants, among other consequences, Parliament had little choice but to agree to the appropriation.
However, Trollip argued it should take the opportunity to ask what had gone wrong and attach to the appropriation conditions to prevent a re-occurrence.
“If we don’t do it on condition we’re always going to be snookered,” he said.
“We have the illusion of being given choice, but actually we’ve been given what’s called Hobson’s choice by a system that we’ve been moved into.”
He said the democratic government had set up a transparent, independent regulator – the National Energy Regulator of SA (Nersa) – to ensure electricity tariffs were sufficient to cover costs, yet since about 2008 had consistently undermined this system by overturning Nersa’s decisions.
Referring to work done by UCT Graduate School of Business energy expert Anton Eberhard showing the multi-year price deter minations (MYPD) had degenerated into a process of “pick a number, any number”, Trollip said this was why MPs were now having to deal with an “emergency situation” by approving the R83bn rescue package.
Eberhard’s work showed in February 2006 Nersa originally awarded Eskom a 5.9 percent tariff increase, but it applied in 2007 for an 18.7 percent revision and received 14.2 percent in December that year.
In March 2008, Eskom applied for another revision – of 60 percent – and was granted 8.5 percent.
In 2009, Eskom applied for a revision of its MYPD increase of 6.2 percent by 34 percent and was granted 31.1 percent.
In the next round it applied for 45 percent, was granted 25 percent and then, after comments by President Jacob Zuma on the need to lower “high” electricity prices, applied for a reduction to 16 percent.
Trollip said the beneficiaries of “politically acceptable” tariff increases that did not reflect actual costs were energy-intensive industrial users, who consumed 70 percent of electricity supply.
“So we’re deciding to take money from taxes and to use this money to subsidise the electricity purchases by energy-intensive industry,” Trollip said.
“This means we have a large, nontransparent, out-of-policy subsidy to the energy intensive sector generally and the electricity sector particularly.”
He said it should be established how much, of the R83bn to be appropriated, had been an effective subsidy of energy-intensive industry and this should be recovered through a tariff premium.
This would send the signal that “we’re not in the business as a country of passing over taxpayers’ money to subsidise these kinds of things and we charge them what it cost to produce”.
Failing to do so would result in an even bigger crisis in future, Trollip said.
His views were unanimously supported by MPs on the committee.
Chairman Paul Mashatile said a draft report would be prepared by the committee staff before the matter was debated on Wednesday.