Eskom hearings: Horror scenarios abound

On Wednesday, the National Energy Regulator of South Africa (Nersa) held the first stretch of its two-day public hearing into Eskom’s proposed price increases. The line-up at the hearing included Eskom, private sector associations, environmental bodies, governmental organisations, unions and social movements. The proposal came under heavy fire, with many of the organisations suggesting alternate solutions.

 Eskom chief executive officer Brian Dames argued Eskom’s case for the proposed increases, citing the power utility’s limitations and the need for a 13% increase for the sustainability of Eskom. An additional 3% increase is required to fund renewable energy supply – a 16% annual increase for the next five years.

Dames said it was the nature of raising debt that any funding received needed to be underpinned with government funding as a guarantee. “We have strong government support and have worked closely with the government on the funding plan for 2018.”  He said those unable to afford electricity would be subsidised by municipal and commercial users able to afford the costs.

Commenting on the assertion that Eskom would be able to cut costs by R100 million with more effective planning, Eskom chief financial officer Paul O’Flaherty said, “Operating costs need to be financially stable. It is a problematic indication that public opinion is that we must wipe out R100 million, even though we are saving the state R30 billion.”

One of the first questions of the day to Eskom was whether Eskom had explained the likely economic and social effects of the proposed increases to South Africans. Throughout the day organisations argued that the negative effects of the proposed increases not been fully explored or explained.

Many of the organisations presented detailed alternate solutions to meeting or ameliorating Eskom’s need for such massive funding, while still enabling the utility to deliver to South Africa a stable energy supply. These solutions highlighted the glaring shortcomings of Eskom’s proposal, resulting in questions about the parastatal’s research and whether it was attempting to obscure what would be over-funding and, ultimately, a profit windfall for the energy firm. One proposal provided a precise guideline for cutting Eskom’s costs by R100 million – the very reduction in costs Eskom argued was impossible.

While the presentations were under way, Cosatu supporters gathered outside the entrance to Gallagher Estate to demonstrate the union federation’s opposition to the proposed increases.

Cosatu provincial secretary Dumisani Dakile told the protestors, “We are not certain that they [Eskom and Nersa] will listen, so we are bracing ourselves for a serious campaign against Eskom.”

Cosatu says it is concerned about Ekom’s proposed price increases because employers will look to cut costs elsewhere in order to survive, placing jobs at risk.

Eskom came in for a barrage of criticism for failing to adequately explain in the proposal why its Mvula Power Station was behind schedule and over budget.

Mike Deats, a former director at Eskom, highlighted the need for long term planning: “What happens after 2018 is a vacuum. This current proposal will look like paradise compared to post 2018 if we leave it unaddressed.”

Dakile criticised Eskom for not considering the effects on the poor of such an increase. “These increases are way above inflation – it is just not sustainable for an average person.”

Karl Cloete, deputy secretary general of the National Union of Metalworkers of South Africa (Numsa), said the union understood that citizens needed to cover some of the costs of overcoming the challenges Eskom is facing, but insisted that “the poor must not be punished for such extreme challenges.”

In analysing the maintenance statistics provided by Eskom, Cloete said, “Eskom needs to be more comprehensive, this looks like a thumb-suck.”  Cloete’s criticism, which appeared to win the approval of the audience, was not limited to the proposed price increase. “Senior managers get paid exorbitant salaries and bonuses, Nersa should query this,” he said.

The extent to which Eskom’s proposal will be successful remains unclear. One thing is clear, though: Eskom and its only shareholder, the South African government, will have few, if any, allies in the days ahead. DM