Eskom’s 5.23% increase ‘too lenient, given utility’s irregular spending’

THE announcement by the National Energy Regulator of South Africa (Nersa) to grant Eskom a 5.23% increase instead of the power utility’s desired 19.9% increase has been met with a lukewarm reaction.

The energy regulator made the announcement yesterday. Nersa chairman Jacob Modise said a document explaining the increase would be published later. He said Eskom had applied for a total allowable revenue of R219.514 billion.

Janine Myburgh, president of the Cape Chamber of Commerce and Industry, said: “Although we feel somewhat vindicated with the fact that Eskom was granted 5.23% versus the 19.9% initially requested, we feel that any increase still sends the wrong message to Eskom.”

She said the chamber objected to increases that have to cover the cost of irregular spending, corruption and mismanagement – “which have been endemic to Eskom”.

“An increase in tariffs is not in the interests of Eskom or private enterprise.”

Eskom, which is the subject of an ongoing parliamentary inquiry, received a qualified audit highlighting irregular expenditure of R3bn.

“The only hope of escaping the utility death spiral is drastic transformation of Eskom’s operating model.”

Myburgh added that there should have been no increase granted. She stressed that said that industry, and the consumer, “can ill-afford any increase in tariffs with an ailing economy growing at less than 1%”.

Myburgh said Eskom should not be spared the luxury of avoiding the essential elements of effective organisation, such as shrewd control of expenses.

She cited Eskom’s expenditure on the use of McKinsey and Trillian consultants, which she described as having gone “far beyond the limits”.

Myburgh also referred to the R30m pension of the parastatal’s former chief executive, Brian Molefe, which was given to him after 18 months of work.

“It defies any reasonable explanation,” she said. “We have bad management deci- sions and overspending on diesel when purchased for emergency power, which bizarrely involved a dentist and a hairdresser.”

Myburgh said any increase in the cost of power would only encourage users to move towards alternatives.

Citing the rooftop solar system, the cost of which cost continues to decrease, she said barriers to alternative resources of energy were “falling away at an incessant pace”.

She said the disadvantage of intermittent supply by renewables was being balanced out by energy storage, including electricity vehicles.

John Clarke, an environmentalist, said he was happy Eskom’s application wasn’t granted.

“The only way (Eskom) is going to regain its legitimacy and credibility is to go go back to the constitution and, in particular, Section 195, which specifies the values and principles governing public administration, including state-owned enterprises,” Clarke said.

In a statement after the announcement, Eskom said it was disappointed by the energy regulator’s decision.

The power utility said it had made its application in line with the multi-year price determination methodology.

The method allows Eskom to submit any changes permitted by the methodology.

Eskom said it will await the regulator’s reasons for the decision, “which will enable Eskom to make an assessment on the impact to the business and then make a decision on the way forward”.

Janine Myburgh