It was better for the country to swallow the “bitter pill” of an electricity tariff hike now, Eskom’s acting chief executive told hearings on the utility’s proposed price hikes on Tuesday.
“Let’s absorb the shock of the increase now. We know this is a bitter pill we are asking the nation to swallow, but we will all ultimately benefit,” Mpho Makwana told the hearing in Polokwane, Limpopo, organised by the National Energy Regulator of South Africa.
Eskom has requested a 35% tariff hike each year for the next three years.
“We believe that we have mitigated the adverse impact on the economy and job losses by choosing a longer time period to achieve cost reflective tariffs.”
Eskom’s delegation was unable or unwilling to answer some of the questions posed by Nersa’s panel, saying it would submit answers to Nersa in writing.
Makwana said the utility’s submission had been informed by demand forecasts, its capital expansion programme and demand management and cost cutting.
For example, the Eskom board had been mandated to explore the sale of a stake of between 30% and 49% of its planned Kusile coal-fired power plant.
“The estimated sale price of R20-billion to R40-billion is optimistic.”
In addition Eskom had looked at “re-phasing” other projects.
On additional funding, Makwana said borrowing billions of rands from the French Export Credit Agency, the World Bank as well as government guarantees would will give security to those wanting to invest in or help Eskom.
He also suggested that independent power producers should be commissioned to help the utility.
Public punished for lack of efficiency
The Democratic Alliance leader in Limpopo, Desiree van der Walt, said: “The public cannot be punished for Eskom’s lack of efficiency. Mismanagement at the utility is no excuse to increase rates. Eskom must seriously look at its own cost effectiveness and at where it can cut costs, particularly with respect to their coal purchases on short-term contracts.”
The DA believed there was an urgent need for an overhaul of the country’s energy sector.
“Most importantly, energy planning must be informed by the imperatives of mitigating our contribution to climate change whilst simultaneously growing our economy.”
Limpopo’s Congress of South African Trade Unions (Cosatu) provincial secretary Dan Sibabi came out strongly against Eskom’s application.
“Cosatu is convinced that while state enterprises should be self-sustainable, Eskom’s proposed tariff increase will have a deep and far reaching negative impact on our economy, which has just bottomed up [sic] from the current global economic recession.”
If the tariff request was granted, it would lead to the closure of most small-scale industries, particularly in manufacturing, hurt small-scale commercial farmers and mining.
“For the Limpopo province, these are the key job-creation sectors of our economy and they are currently struggling to survive and retain jobs that are in existence, the loss of which will lead to the deepening of poverty … ” he said. – Sapa