Civil society opposed to Eskom's requested tariff increases

CAPE TOWN, SOUTH AFRICA: Wednesday 21 November 2018: Delegates participate in the Southern African Faith Communities' Environment Institute (SAFCEI) which hosted a People's Power Learning Fest at the Tshisimani Training Centre in Mowbray. The delegates then proceeded to protest outside the gates of Parliament.
Photo by Roger Sedres for SAFCEI

MEDIA RELEASE

11 JANUARY 2019

On Monday (14 January), the Southern African Faith Communities’ Environment Institute (SAFCEI) – along with faith and community leaders, and other partners – will present its arguments to the National Energy Regulator (NERSA), opposing Eskom’s proposed tariff increases. Eskom is requesting an electricity price hike of 15% for 2019, with a projected overall increase of 45% to 2021.

The troubled state-owned enterprise (SOE) made its Third Multi-Year Price Determination Regulatory Clearing Account (RCA) Year 5 (2017/18) and Fourth Multi-Year Price Determination (MYPD4) applications to NERSA last year.

Vainola Makan, SAFCEI’s Energy and Climate Justice Campaign Coordinator, says “If granted, this price increase will severely impact all consumers of electricity across the country, many of whom are already struggling to pay their daily bills. Communities should not have to bear the brunt of the energy increases every year, particularly since Eskom management does not seem committed to recovering the mismanaged funds.”

“Nationwide load-shedding is still a reality for South Africans, highlighting once again the urgent need for restructuring and improved management of Eskom. With so many citizens still struggling for justice when it comes to their access to electricity, it is concerning that Eskom does not seem to be thinking about the country’s energy future in a rational or sustainable way. The SOE does not seem to have the public's interests at heart,” says Makan.

SAFCEI is objecting to Eskom’s application as it is based on an inflated demand projection, which is out of touch with consumption trends. And, Eskom’s focus seems to be on managing their debt, rather than curbing escalating operational costs caused by poor management. SAFCEI – the multi-faith NGO which played a crucial role in stopping government’s secret and illegal nuclear deal – also rejects the 2017/18 RCA application in its entirety.

SAFCEI’s Eco-Justice Lead, Liz McDaid says, “Raising electricity prices to enable Eskom to continue to operate its fleet in an inefficient manner, not only puts a heavy burden on the poor and vulnerable. Increased electricity prices also impacts businesses, particularly small ones. Not sensible in an economy that is not growing.”

SAFCEI believes that ethical custodianship of the Earth’s resources is essential to sustainable development, and urges NERSA to operate on a value-based system that places economic and social justice for all citizens at the forefront of its agenda.

“Furthermore, SAFCEI calls on NERSA to conduct its own research, and to commission or produce an independent report – which should be made available for public comment – with recommendations for the restructuring of Eskom. Eskom’s role should be refocused to ensure that it promotes the shift to clean energy solutions. The reskilling of workers should be a primary focus, since this will ensure that our transition from dirty, high-risk energy to clean, renewable energy is just and serves the public’s interest,” concludes McDaid.

According to McDaid, there a number of other issues regarding Eskom’s price hike applications to NERSA that need to be interrogated. These include:

• NERSA should not allow Eskom to claw back additional monies which it has not been able to recover from its operations, especially since Eskom has not demonstrate good judgement in its operational planning. And, by granting tariff increases on the recent RCA applications, the regulator has already failed to act in the public interest.

• Current nuclear and coal energy costings are skewed, since most of the fleet has already paid off its capital expenditure. The externalised costs-of-supply from coal and nuclear have also been excluded in its operational costs. “Through this lack of clarity regarding the total cost of supply for different energy generation types, Eskom creates the impression that these costs will remain cheap in the future and that renewable energy is more expensive that its own operations. It is therefore, important that Eskom be required to present its expenditure in a way that reflects all the costs accrued, including the primary costs to fossil and nuclear generation,” says McDaid.

• In the global context, financial considerations are increasingly responsible for countries moving toward renewable energy and away from coal generation. Both China and India have cancelled proposed coal power plants, admitting that newly built coal generation was not financially viable. “Scenario 1 in the draft IRP 2018 plan clearly indicates that the least cost option going forward is mostly renewable based, since renewable electricity generation has become cheaper than both that of nuclear or coal. Eskom should be directed to reduce its expenditure on the coal fleet with replacement of new coal with new renewables, improved management of both existing new coal build and maintenance, and early decommissioning of old coal,” adds McDaid.

• SAFCEI also suggests that Eskom’s shareholder return be halted until Eskom is able to recover all its costs and paid all its debts. To support this NERSA should disallow any portion of the tariff for shareholder return as this is not in the public interest in the current economic environment.

The Western Cape public hearings will take place on 14 January from 9am – 5pm at the Southern Sun Cape Sun, 23 Strand Street, Cape Town, 8000. For access to SAFCEI’s submissions, go to www.safcei.org.

Follow the link or see attached document for details on the public hearings in other provinces: http://www.nersa.org.za/ShowFilterDocuments.aspx?Category=All&SubCategory=Public+Hearing+Notices&PageId=223)

ENDS

Issued by Natasha Adonis, on behalf of the Southern African Faith Communities’ Environment Institute (SAFCEI). For more information, contact Natasha on 0797-999-654 (also on WhatsApp) or natasha@safcei.org.za.

Note to Editor:

• The Regulatory Clearing Account (RCA) is a monitoring and tracking mechanism that compares certain uncontrollable costs and revenues assumed in the MYPD decision (made by the National Energy Regulator of South Africa (NERSA)) to actual costs and revenues incurred by Eskom.

• A "RCA" application, is an application for revenue related to cost recovery and revenue adjustments based on actual past variances, or backward looking reconciliation. It is NOT a revenue application based on future estimates. Eskom RCA Presentation at the NERSA hearing.

• SAFCEI provided input into the MYPD3 Eskom Application, the DoE IRP2010 and the updated 2013IRP, the draft Integrated Energy Plan (IEP) first 2010 carbon tax discussion paper, the 2013 carbon tax discussion paper, the Davis Committee on the Carbon Tax, the selective reopener of the MYPD3 of 2015 and RCA applications for 2013/2014, 2014/2015, 2015/2016. Recently, SAFCEI submitted comment to both the DoE and Parliament on the draft IRP2018.

• Eskom’s financial crisis and the viability of coal fired power in SA. Grove Steyn, Jesse Burton, Marco Steenkamp Nove 2017 http://meridianeconomics.co.za/wp-content/uploads/Eskoms-financial-crisis-and-the-viability-of-coalfired-power-in-SA_ME_20171115.pdf