Treat Eskom as national crisis, instead of shovelling more money into pit

Eskom’s incapacity to deliver and spiralling tariffs need to be tackled as a national crisis, as higher prices will not contribute to solving its problems, according to the Organisation Undoing Tax Abuse (Outa).

The pick-a-price solution used by the National Energy Regulator (Nersa) is also not a solution.

Responding to Nersa’s decision to increase electricity prices by just under 10%, after Eskom asked for 20%, Outa says the price increase should be blocked and replaced by urgent attempts to provide solutions for the Eskom crisis.

“We do not believe that the 10% increase should be allowed on top of the money it will receive as a bailout,” says Liz McDaid, Outa’s parliamentary and energy advisor.

“Nersa has done what it normally does: look at both sides and take the middle: 10% instead of 20% that Eskom wants or 0% that the public wants.”

ALSO READ: Bad news for you, worse news for Eskom – Nersa caps tariff increase at 9.61%

No reasons for pick-a-price decision

McDaid says Nersa’s pick-a-price solution was again delivered without reasons.

“NERSA should apply its mind. We ask for nothing more than inflation. Thursday’s budget gave some tax relief, supposed to help keep the cost of living down, but this electricity hike will impact on the cost of living.”

It is also unclear if Eskom will get further increases pending the resolution of all the ongoing claw-back cases that could cause more price increases, says McDaid.

While South Africa cannot afford Eskom to collapse, individuals and businesses cannot afford to lose access to basic services increasingly priced out of reach on top of annual government bailouts. McDaid says simply hiking the electricity price is not the solution and neither is transferring Eskom debt to government.

“Eskom, the ministries of public enterprises and mineral resources and energy should cooperate and work in the same direction. The recently published draft Electricity Pricing Policy and Electricity Regulation Amendment Bill moves in the right direction, although it has some challenges.”

ALSO READ: Nersa granting Eskom only 9.6% hike still bad for economy, consumer

This is what government should do about Eskom

Outa suggests that Eskom and government work on:

• Moving ahead with restructuring Eskom
• Moving ahead with unbundling Eskom
• Unbundling Eskom Generation speedily
• Selling off non-core assets
• Selling off some core generation assets to repay debt
• Taking on non-government shareholders to recapitalise the entities with non-government equity to help pay back debt
• Selling off core loss-making distribution assets, such as Soweto and other poorly performing areas to entities that can do things better, reduce losses and raise money to pay debt
• Listing the unbundled entities on the JSE to take on non-government shareholders, raise capital and reduce debt
• Improving procurement to reduce waste and cut corruption and maladministration
• Reducing staff and wages and improving efficiency and productivity
• Replacing poorly performing plants with least-cost new plants (wind and solar energy and flexible generation capacity)
• Reducing electricity theft and non-payment
• Improving revenue collection and reducing arrear debt, particularly from municipalities
• Reducing cable theft and vandalism through better asset protection
• Implementing more effective maintenance
• Ring-fencing the carbon tax and electricity levy on coal-generated electricity paid by Eskom to government and using this to improve energy efficiency and off-grid electricity
• Using the electrification grants to Eskom and municipalities to provide off-grid electricity to households.