Eskom 15% tariff hike unjustifiable and unfair
The 15% Eskom electricity tariff increase is unjustifiable and unfair and will cause untold hardship to the millions of unemployed and poor South Africans who may be forced to resort to cheaper but unsafe means of energy such as paraffin and coal.
The tariff increases that will be passed on directly to consumers, were effective from April 1 and Eskom cited its huge debt (the entity is owed billions of rands by municipalities) when it applied to the North Gauteng High Court for permission for hikes of more than 15% – a rise that is almost 4 times above-inflation.
Last week, the National Union of Metal Workers of South Africa (Numsa) said Eskom’s chief executive André de Ruyter has demonstrated a total inability to stabilise the power utility.
The union said the country had experienced the worst load shedding – stage six for the first time in history.
Numsa spokesperson Phakamile Hlubi-Majola told The Sunday Independent that under de Ruyter, Eskom has failed to re-negotiate almost all the coal contracts it identified as necessary to reduce its costs.
“The costs are passed on to the consumer and as Numsa we always have been opposed to the Eskom tariff price hike.
“So effectively, what people are paying for now or what people are complaining about now when they see that the price has gone up by 15%, is a knock-on effect of these primary coal prices that they were unable to re-negotiate, as well as the renewable energy independent power producers, bloated exorbitant costs.
“This is a reflection that the very things we are saying are crippling Eskom and are a burden on its finances and are a burden on ordinary citizens,” she said.
However, Eskom spokesperson Sikonathi Mantshantsha said price increases have to be implemented regularly in order to ensure security of supply.
“The annual price increases were regulated by the National Energy Regulator SA (Nersa) under strict guidelines as dictated by the constitution, the Electricity Supply Act and the Electricity Regulation Act, among others.”
Eskom has been keeping South Africa in the dark for a few years now after initial promises that more electricity would be generated from the two “white elephants” Medupi and Kusile power plants that have sucked in billions of rand in investment, but have failed dismally to function optimally and produce enough power to keep the economy on its feet.
According to Mantshantsha Eskom budgeted R140 billion for Medupi Power Station and has spent about R122bn so far, while it has cost the fiscus almost R110bn for Kusile.
In spite of the money spent, the government has recently announced plans to source and produce 1 845MW additional energy from eight Independent Power Producers (IPP) to help Eskom meet its demands to keep the lights on.
But, that too will come at a heavy price for cash-strapped consumers who are still coming to grips with the aftermath of hard lockdowns that caused millions of industries and SMMEs to shut down, shedding many jobs in the process.
The Department of Mining Resources spokesperson Nathi Shabangu said the project (IPPs) would be ready in August 2022, and they were waiting on the bidders to meet financial closure by the end of July 2021.
“The prices for the proposed solutions range from R1 468 per megawatt hour (MWh) to R1 885 per MWh.
“The weighted average price is R1 575 per MWh.”
According to the South African Federation of Trade Unions, the IPPs are a privatisation of energy and production and supply without the government having to go the traditional way of privatising Eskom, said its spokesperson Trevor Shaku. “Indirectly, the gradual increase of energy production by private producers will lead to the scaling down of workers in Eskom, as their consumer demand and supply capacity diminishes.
“The subsequent reduction of Eskom’s supply of energy will necessarily mean energy private producers come to dominate, and with them, come higher prices,” Shaku said.
Shaku added that the introduction of IPPs was to turn Medupi and Kusile into white elephants.
“The introduction of the IPPs may be to avert the servicing costs of structural faults and eventually render them redundant.
“In such a case, the electricity grid which was supposed to be produced by Medupi and Kusile will be covered by the IPPs, and thus rendering the two plants even more redundant.”
Energy expert Andile Nchabeleng said the introduction of IPPs and tariff increases was a strategy to recover money spent on Medupi and Kusile.
“They are trying to recover costs related to their daily expenditure on power plants. The major thing is that there should be an introduction of a capital power programme.
“There should be an investment tariff. When Eskom used R450bn for a debt that was budgeted for at R200bn, it was just plain corruption.
“Now, the same thing has been quadrupled in terms of costs, and this is not advantageous to us, and those costs have to be repaid. That is why Eskom has to continuously up its tariffs in order to recover its costs.
“The other element of tariff increase is related to the payment of IPPs, because Eskom does not have money to recover anything.
“So, it has to recover it from consumers. They are not like other companies where they can make maximum profit. The whole model is flawed where you have a tariff that does not reflect the real truth,” Nchabeleng said.
Ted Blom echoed Nchabeleng’s sentiments, saying that both Medupi and Kusile were not fully functional due to corruption. “Eskom numbers indicate expenditure of about R160bn each on Medupi and Kusile. India built a similar power station using SA advisers for R35bn. “Initial quotes to Eskom were R34bn.
“They (power stations) are not working because the corrupt Clever Jacks at Eskom declined to take off the shelf power station solution, and wanted to design their own via outsourced engineers, creating more space for corruption,” Blom said, adding that both power stations have major flaws.
“Eskom believes it can patch up these flaws, and their engineers privately tell me that is not possible,” said Blom.