Picture: Henk Kruger/African News Agency (ANA) Archives
Picture: Henk Kruger/African News Agency (ANA) Archives

Nersa must reject Eskom’s new tariff proposal and impose strict eco-social conditions

By Time of article published Jan 14, 2022

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Submission by the South Durban Community Environmental Alliance (SDCEA)

SDCEA is a non-governmental organisation consisting of 21 community and environmental organisations in South Durban. We were launched in 1995 to unite members in a common struggle for a healthy living environment and environmentally sustainable and socially just development.

Since then, we have operated as a Non-Governmental Organisation, Community-Based Organisation and Social Movement catalyst for the Durban and broader KwaZulu-Natal coastline, and in these roles, we have been tenacious in challenging both government and industry to address the inequities of pollution and environmental injustice.

For decades we have been watchdogging all the ways Eskom abuses our society, democracy, environment and economy.

Not only have we made repeated appeals to Nersa which are invariably ignored or downplayed; we have taken our concerns to the most powerful people in the world, e.g. in fighting Eskom’s corruption-riddled eco-catastrophic Medupi coal-fired power plant.

The analysis we have of Nersa’s failures allows us to insist on several components which are far-reaching but long overdue.

They entail addressing the financing of long-standing corruption at Eskom, the need for demand-side management of electricity, the climate catastrophe requiring full cost accounting, the inclement Carbon Border Adjustment Mechanism sanctions, the absurd turn by Eskom from coal to methane gas, and the energy justice missing in Eskom’s policy to black townships and rural areas.

Corruption-financing costs that Nersa should tell Eskom to reject

In January 2010, SDCEA catalysed a local, national and global protest movement with more than 150 organisational endorsers, against the $3.75 billion World Bank loan primarily aimed at financing Medupi. In April 2010 we failed – notwithstanding “no” or abstention votes by several governments (even the United States) – and as a result, South Africa is stuck with what is universally recognised as an appalling disaster. Nersa should be ashamed of having periodically approved Medupi and Kusile, and the resulting absurd tariff increases and foreign debt liabilities.

Hitachi’s corruption of the ANC occurred through Chancellor House, via Eskom chair Valli Moosa who was on the ANC Finance Committee at the time Hitachi (now with 25% local Chancellor House ownership), received tens of billions of rands worth of boiler-making tenders.

The Japanese firm was prosecuted under the U.S. Foreign Corrupt Practices Act and in 2015 paid an R300 million fine for its South African graft, but the money went to Washington, not Pretoria nor to Eskom customers. What has Nersa said about this?

As we have requested repeatedly, Nersa should long ago have insisted that Eskom not repay loans that are so blatantly corrupt. There is a long-standing legal principle, “Odious Debt,” which applies here. Nersa’s failure to engage this option makes the regulatory agency a clear collaborator with corruption of the greatest magnitude South Africa has ever experienced.

Even the mining and smelting industries, which had lobbied for Medupi and other coal-fired power plants, admits that this plant plus Kusile – together nearly entirely responsible for Eskom’s R400 billion debt and also the largest single component of South Africa’s $170 billion foreign debt – are now doing more harm than good.

The Brenthurst Foundation – whose roots are in the Oppenheimer family which became enormously wealthy through cheap electricity going to their mines and smelters, even after apartheid – even announced their view, that Medupi and Kusile be scrapped. Nersa should now, belatedly, insist on reconsidering any Eskom tariff increase that includes expenditures in the form of Odious Debt repayments on the corruption-riddled Medupi and Kusile coal-fired power plants.

The mining-smelter race from Eskom, and urgent need for demand-side management

The big mining and smelting firms are shifting as fast as possible from coal-fired power that Eskom still supplies for more than 85% of its grid, to their own in-house solar, wind and hydro.

In the latter category, it is notable that the largest Eskom consumer, South32’s Richards Bay aluminium smelter, fears European Union sanctions – the Carbon Border Adjustment Mechanism – given how large the difference now is between South Africa’s carbon tax (US$0.42/ton) and the current EU carbon price ($100/ton on the Emissions Trading Scheme market). Revealingly, South32 is now trying to promote a no-emissions pumped storage scheme (at De Hoop Dam in Limpopo) so as to escape Eskom’s coal and gas regime, in turn, so as to avoid becoming uncompetitive.

This kind of escape route by the Minerals-Energy Complex is a clear signal that Nersa has profoundly failed to rationally analyse potentials for demand-side management, so as to encourage radical shifts in electricity consumption. Obviously, the needs of SDCEA and our allies are to first and foremost have Eskom address energy deficits of society (especially poor people), but we also insist that rational use of electricity would mean those firms which use it for labour-intensive, ecologically-sensitive production should be prioritised.

Instead, Nersa has repeatedly allowed capital-intensive, ecologically-disastrous firms to acquire ultra-cheap Special Pricing Agreements – e.g. that South32 Richards Bay smelter and others in the Anglo American stable abuse (with prices often just $0.01/kWh) – due to the ongoing crony capitalism linking these firms to state decision-makers, in a classic example of revolving doors. Another example is Nersa’s failure to halt Sasol’s purchase of cheap electricity from Eskom, to squeeze coal and gas, to make petrol (which could much more inexpensively be imported, once the full cost of emissions is considered). As a result, Secunda remains the single most prolific source of CO2 emissions in the world.

What these traditions mean, is Nersa contributes to this coming decade’s wreckage of the South African economy, as our exports shrink thanks to Eskom’s fossil – coal and now gas – addiction.

Facing climate sanctions, due to Eskom’s worsening fossil-based energy supplies

Because of the power of the traditional Minerals-Energy Complex, the exceptionally high CO2 emissions embedded in South Africa’s energy supply, in turn, will sabotage the rest of the economy, as climate sanctions start hitting South Africa hard this decade.

It is vital for Nersa to remember that South Africa’s economy is the world’s 3rd highest emitter of greenhouse gases, measured per person, per unit of output. Our economy is by far the largest emitter on the African continent, far worse than Egypt, Libya, Angola, Kenya and Ghana. Eskom was the main force driving South Africa’s own emissions to more than 500 megatons/year.

The failure of Nersa to incorporate full-cost accounting and urgently address the climate catastrophe has meant that Eskom, the South African government and our society owe, in essence, a vast climate debt to the rest of the continent. The latest peer-reviewed research (by European researchers at University College London) reveals that the Social Cost of Carbon is $3000/ton, so Eskom’s 200+MT/year cost South Africa and the world R9 trillion annually, a factor Nersa appears entirely ignorant of.

The shocking failure of Nersa to engage in full-cost accounting when considering Eskom’s tariffs over past decades means not only is the firm’s massive CO2 and methane damage completely ignored, but the extreme local pollution on the Mpumalanga and now Limpopo highveld creates among the world’s worst cases of Nitrous Oxide and Sulphur Dioxide emissions, responsible for thousands of premature deaths annually.

Even worse pollution and what is termed “blood methane” – gas to be drawn from Cabo Delgado, Mozambique – and Wild Coast or West Coast methane extraction will result from Eskom CEO Andre de Ruyter’s strategy of coal-to-gas conversions. These are extremely controversial proposals and must be nipped in the bud so that South Africa does not have even higher greenhouse gas components of our energy supply, due to the fact methane is considered 80 times more climate-damaging in the short-term (20 years) than CO2.

In sum, what we are seeing due to Nersa’s failure, is firms that can escape Eskom – due to inclement sanctions (like South32) or to excessive load-shedding (such as Sibanye-Stillwater and other mining houses) – will do so, leaving a smaller revenue base.

Anti-social, racist Eskom’s ‘load reduction’

In turn, as revenues shrink, what we are seeing is Eskom ever more desperately clamping down on those who have an inability to pay, instead of rethinking its failed, utterly inadequate 50 kWh/household/month “free basic electricity.”

The latter point is vital because we also believe Nersa has been extremely anti-social since mid-2020 in condoning new Eskom ‘load reduction’ strategies – introduced by De Ruyter – that closely resembles an apartheid-era collective punishment strategy. Our own allies in community groups – e.g. the Soweto Electricity Crisis Committee – have repeatedly made suggestions about how impoverished black townships and rural municipalities should be given greater cross-subsidisation and cooperative renewable energy institutional options (such as the U.S. did in the successful Tennessee Valley Authority expansion of the 1930s).

Nersa should insist that Eskom install cheap renewable energy sources, worker self-managed and community-controlled but socially owned (not expensive privatised systems as at present) in our townships and villages.

They should have enough power to provide at least 20 Ampere so as to run appliances that assist with gender equity (in time spent cooking and heating) and that replace dirty energy (firewood, coal and gas). An initial capital outlay would be followed by affordable tariffs covering relatively low maintenance costs, within a Free Basic Electricity framework. Without such an approach, prices have soared more than 500% in real terms since 2007, leaving millions either disconnected or with dangerous informal connections.

Nersa has never been an ally of our community movements and should be ashamed of that stance as well, for by allowing load reduction, it contributes to Eskom’s culture of class, race and gender oppression, not to mention ecological destruction.

Conclusion

The current tariff proposals by Eskom should be rejected because they still overwhelmingly favour high-carbon energy and hurt ordinary consumers. It is especially worrying that a large share of coming Eskom capital investment will be in coal-to-gas transformations starting at the Komati plant near the Sasol Pande-Secunda gas pipeline and that ‘clean coal’ Carbon Capture and Storage mythology.

All that must be rejected, and indeed Eskom’s overall generation, distribution and retail strategy need to be completely reconsidered.

* SDCEA is a non-governmental organisation consisting of 21 community and environmental organisations in South Durban.

** The views expressed here are not necessarily those of Independent Media and IOL.

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