Power producer Eskom’s 19% hike proposal has been slammed by consumer groups. Picture: Reuters
Power producer Eskom’s 19% hike proposal has been slammed by consumer groups. Picture: Reuters

Eskom explanation for tariff hike slammed

By Nosipho Mngoma Time of article published Oct 17, 2017

Share this article:

Durban - Eskom says the major reason for the need for a whopping 19.9% tariff increase, is to make up for its own sales projections made earlier, which were not realised.

If approved by the regulatory authority, once municipalities added their own increases, the tariff increases imposed on customers by municipalities could be as much as 27%.

Speaking at a consultative session in Westville on Monday Eskom’s senior manager electricity pricing Deon Conradie said the projections for Multi Year Price Determination 3 (MYPD3), were done two years before the decision.

This was for an average 2.2% increase based on sales predictions which were higher than the revenue made. 

“Moving to the new cycle, you have to use the actual realistic sales forecast. The amount of sales that Eskom will get in has dropped, therefore the unit price compared to last year, has increased."

He said customers were seeing a high percentage of "correction".

The previous projection was informed by two decades of 4% growth. 

But the economic downturn meant their sales had dropped. 

“I think we underestimated the impact of the economy. If you talk to the captains of industry, they will tell you that there is just not enough markets for their products and there is a lot of instability and they would really like to see some certainty around the growth path going forward,” said Conradie. 

He said to try to get the price as low as possible Eskom had accepted a lower return. 

“We have in a sense sacrificed R12 billion if you compare our return from this year to last year.”

The Organisation Undoing Tax Abuse, however, rubbished this reasoning, saying Eskom’s own false projections did not give them the licence to punish the consumer. 

Executive chairman Wayne Duvenage said the power utility should rather be looking at cutting operating costs, tailoring its business according to industry requirements. 

“Eskom is an inefficient organisation which is getting far more money than it should, and that’s what we are basing our objections to Nersa on. It’s pathetic. Their argument is futile and we will fight it with civil activism and in the courts.”

Duvenhage said Eskom should look at ridding itself of maladministration, corruption and mismanagement. 

“We don’t believe Eskom needs this money.”

According to Conradie, about 45% of their sales were to direct customers which were mainly customers in the rural areas, then industry and municipalities. 

If the 19.9% tariff increase is approved, municipalities could then in turn increase electricity to consumers by up to 27%. 

Duvenage said South Africans could not afford this, least of all to feed Eskom's “high salaries, bonuses and corruption.”

Ina Wilken, chairwoman of the of the SA National Consumer Union (Sancu), previously said that such an increase would be a terrible blow for consumers. 

“When electricity increases, everything else is going to increase because everywhere you go they use electricity, so consumers won’t just feel it in their own homes.”

Wilken said consumers were already struggling and having to spend less to meet their basic needs. 

“It really won’t be fair on consumers, especially when you consider the bonuses and payouts Eskom gives its staff and people who leave, this really does not take the consumers into consideration. It is not good for consumers, the country and the economy,” said Wilken. 

Share this article: