Cosatu rejects above-inflation tariff hikes to bail out “drug addict” Eskom



Granting Eskom above-inflation tariff hikes is like feeding bailout addictions of a drug addict, the National Energy Regulator of South Africa (Nersa) was told.

Matthew Parks (Pic:Trevor Samson/Financial Mail)

Nersa is holding public hearings over the next three weeks, relating to Eskom’s application for the regulatory clearing account (RCA) balance for three years (2014/15, 2015/16, 2016/17). The amount comes to R66,6-billion. Nersa will consider the presentations made and decide what the tariff hike will be, and how it will be phased in to recover the monies.

The Congress of South African Trade Unions (Cosatu) made its presentation where it outright rejected the tariff hike being sought by Eskom.

Matthew Parks, Cosatu parliamentary coordinator, explained that the labour federation does not want to see Eskom collapse. “If Eskom collapses, the State will collapse tomorrow,” he said.

However, he took issue with the leadership of Eskom, and government in the years in question, which resulted in the mismanagement of funds leading to this predicament in which Eskom finds itself.

“We are angered by the leadership of Eskom over the past five to ten years. Not just Eskom, but the former president, the former ministers of energy, and their friends the Guptas have really done a disservice to the nation,” he said.  “We call on Nersa to protect workers and their families and to protect the economy and reject the tariff hike.”

Parks explained that Eskom was essentially asking workers for the bailout. “It is not workers who looted Eskom… Politicians looted.” Parks explained that the request was unaffordable and called it “unreasonable and unjustifiable” and the fact that the outstanding R66,6-billion is considered an unforeseen expense” is hard to believe. “It is difficult to take Eskom’s poverty plea seriously.”

He also took aim at how Eskom failed to give a proper explanation of former CEO Brian Molefe’s employment status. “If you can’t explain that, how can you explain the R66-billion or a 30% tariff increase?” he asked. “It seems like we are feeding the bailout addictions to a drug addict of some sorts.”

Parks raised concerns that Eskom keeps applying for tariff hikes, and even if a 50% increase was granted, Eskom would return to ask for more.

He expressed fears that the increase in electricity prices would also add pressure to the Reserve Bank, which recently reduced interest rates. “This will put the Reserve Bank into a corner,” he said.

Parks explained that increasing electricity costs would not make SA businesses competitive and would possibly deter investment.

Eskom treated with “kid gloves”

Parks called out the lack of accountability when it comes to mismanagement at the power utility. “Somehow because Eskom has a gun to our heads as a nation, we treat it with kid gloves.

“We think Eskom has failed to come clean on state capture and in taking serious action. We see former executives caught up in scandals simply being allowed to retire.

“If a worker was to steal some milk at Eskom, I’m sure he would be dismissed immediately,” he said.

Among the other proposals by Cosatu is to stick to increases once a year which are inflation-based. “You can’t have 30% increases every single year,” he said.

Cosatu requested a comprehensive criminal investigation, and argued that there must be consequences for those who are found to be guilty.  Cosatu also wants the president to reinstate Eskom’s war room but it must be inclusive, with representation from labour and civil society.

Finally, Eskom should develop a “serious sustainability plan” to resolve its debt crisis and protect jobs and the sovereign rating of South Africa.

Nersa panel member Muzi Mkhize said that the regulator would carefully consider Cosatu’s proposals.

Eskom acting CFO Calib Cassim explained during his presentation that Eskom did not have a “crystal ball” to predict the future six years ago. If it did, then Eskom would not be sitting in the current hearing discussing the regulatory clearing account.

Cassim asked Nersa to focus on making a judgment on the R66bn in a way that is efficient and prudent. “[The regulator] must take into account the impact on the consumer, the economy and its affordability, but must not forget that Eskom must remain financially liable,” he said.

Eskom does not expect the regulator to make a once-off decision on the hike, instead it is possible that the recovery may be dealt with on an annual basis.

He warned that the implementation should not happen over a period which is extended for too long as it will not help with sustainability of Eskom, which needs to remain producing electricity to meet the needs of the country.

Acknowledgement

This article was first published by Fin24 and is republished here with permission.

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