HomeIndustry SectorsFinance and PolicyEskom under scrutiny at the start of public hearings

Eskom under scrutiny at the start of public hearings

Organisations such as Virgin Active and Nacaam are opposing the utility’s RCA application. Pic credit: Lowvelder

Monday marked the start of a nationwide series of public hearings regarding the state-owned power utility, Eskom’s application to recoup ZAR22.8 billion ($2 billion) through a regulatory clearing account (RCA). The hearings will be conducted by the National Energy Regulator of South Africa (NERSA) with the first one kicking off in Cape Town.

In addition to the RCA amount, the utility is looking to claim back revenue loss amounting to ZAR11.8 billion ($716 million), which according to Eskom spokesperson Khulu Phasiwe, is as a result of the country’s economic downturn.

Phasiwe said: “The economy has not been doing well and as a result, many of the big manufacturers and the mining sector have not been using as much electricity as they used to before,” Eye Witness News reported.

According to the media, the regulator has pointed fingers at the utility for not having stringent cost controls.

Approving tariff increase

Should the RCA application be approved, customers could see the tariff increase by 17%, effective 1 April 2016 –with an estimated 58% of the country living below the poverty line, this leaves those communities in a hard place.

Phasiwe added: “The eight percent [that] has already been given to us in 2013 is the additional amount, so for example, if we were to get an extra percent on top of the eight percent that we already have then effectively it would mean that at the beginning of April we’ll have a 16 percent tariff increase.”

Public hearings: Opposing public

Opposing the utility’s RCA application is global health club chain, Virgin Active SA and automotive components company, Nacaam.

Virgin Active SA told Nersa in its presentation on Monday that it is unable to withstand the continued tariff hikes, on top of the crippling value of the rand, Fin24 reported.

The health club said: “A further tariff increase has a massive compounding effect and is baked into the base forever. Compound effects of previous years’ increases should be more than sufficient for Eskom.”

It added: “Allowing Eskom’s proposed increases has the potential to perpetuate the poor management and planning issues at Eskom. Tariffs are easily used as a convenient ‘release valve’ rather than Eskom being forced to find more innovative ways to address its issues.”

Roger Pitot of the Authority of the SA Automotive Components Industry said: “Based on Eskom’s rationale, similar ‘corrections’ can now be expected in future.”

He added: “Does Eskom realise the consequences? Users and particularly business and industry will further reduce their usage of power as encouraged by Eskom and as prices escalate, creating a vicious circle of lower revenue, surplus capacity and Eskom requests for price increases, which are certain to continue.”

In its presentation at the hearing, Nacaam highlighted that the company “is in a self-induced spiral of decline” and “cannot be allowed to be the cause of lower fixed investment, deindustrialisation and job destruction in South Africa”.

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.