The tariff increases of 15% per year proposed by Eskom in its MYPD 4 application, if approved, would have dire consequences for the local and national economy.
Speaking on behalf of the Nelson Mandela Bay Business Chamber at a Nersa public hearing held today to evaluate Eskom’s application, Business Chamber board director MC Botha said the ripple effect of such high tariffs could lead to economic decline, a decrease in investment and an increase in unemployment and poverty.
The Business Chamber has been actively defending the interest of businesses by lobbying against unreasonable tariff hikes at Nersa’s public hearings since 2006, and strongly objected to the latest application.
Botha said the application was unrealistic and could mean that Nelson Mandela Bay consumers would contribute R17-billion in revenue to Eskom over the next three years. This would include a total increase of about R5-billion.
He also argued that Eskom’s sales forecast during the MYPD 4 period is based on the assumption that increased prices would have no effect on electricity sales, while the Business Chamber expects Eskom’s sales to decrease by at least 3% per year, in line with a report by Deloitte.
“It is clear there was a substantial deviation [in the past] between what Eskom forecast and the sales that were achieved,” said Botha. “We maintain that Eskom’s increases must be contained within inflation to stimulate electricity usage.”
Botha commended Nersa for their approach to Eskom’s previous application, where Nersa granted a 5,23% increase instead of the 19,9% increase requested by Eskom. He also encouraged the regulator to continue along this path.
“What we’ve heard today is an abject admission of failure by Eskom. We are not in safe hands. Eskom expects the electricity user to pay for its inefficiencies.”
David Mertens of the Business Chamber’s electricity task team said all spending on new capital projects should be suspended until new capacity is required, as Eskom is already generating more electricity than it can sell – while the parastatal’s current capital spending amounts to about 59% of its total revenue.
“Customers should not have to pay for Eskom’s recklessly incurred capital and expensive IPP contracts,” said Mertens.
The Business Chamber’s presentation ended with further recommendations to:
- Instil a culture of payment in the customer base;
- Reduce municipal tariffs to stimulate the economy; and
- Review tariff structures in order to stimulate sales growth.
Nelson Mandela Bay Business Chamber CEO Nomkhita Mona said innovative solutions would be needed from Eskom in the long term. “We do not see any innovative thinking or strategy in the application by Eskom,” said Mona. “They are trying to fix the same model when innovative thinking is needed to counteract the trend of rising tariffs. We cannot allow consumers to pay for Eskom’s mismanagement and shortcomings. We expect the power utility and the shareholder (government) to come up with forward-looking solutions and strategies for energy supply, to foster economic growth.”