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NERSA says no

Eskom’s application to the National Energy Regulator of South Africa (NERSA) has been turned down, despite the utility’s claim that it is facing a funding gap of up to R200bn by 2018. 

Jacob Modise, the chairman of Nersa, pointed out that Eskom had not provided reasons for the delays in commissioning its newest power stations of Medupi, Kusile and Ingula.

The utility had also failed to take into consideration the effect a R23bn cash injection would have on its financial performance. In addition to that, Eskom failed to provide information on what effect a government conversion of its R60bn loan into equity would have. 

Modise also noted that high prices of electricity would result in job losses, and that this was Eskom’s third multi-year price determination application to Nersa.

NERSA also said it will look at ways of giving incentives to Eskom to maintain its aging fleet of power plants and penalise the utility for poor performance.

The decision has been lauded by trade union Solidarity, the City of Cape Town and the DA. The proposed additional 9.58% increase would have brought this year’s total increase to more than 22%.   

Solidarity said the increase would have had “devastating consequences” and that it is encouraged that NERSA is forcing Eskom to consider alternative solutions to its financial woes.

The City of Cape Town’s deputy mayor Ian Neilson was quoted as saying that he welcomed NERSA’s comments that the utility’s application was incomplete and not consistent with the constitution.

“We applaud Nersa’s display of independence, openness and integrity in this process.”

Democratic Alliance shadow minister of energy Gordon Mackay added that load shedding is robbing South Africans of their livelihood, as investors lose confidence in the economy and the manufacturing industry is forced to cut jobs.

“The electricity crisis has already cost the economy billions and resulted in countless job losses. Passing the problem on to consumers through above-inflation tariff increases adds insult to injury, and cannot be supported,” said Mackay.

Fin 24 reports Nersa’s decision paves the way for the long-term reform of the energy sector in South Africa, according to Mackay. “The Department of Energy and Eskom should now break Eskom’s monopoly through greater competition within the sector, an increased focus on renewable energy and the rejection of expensive nuclear energy.”

He added that it is now time for the cash-strapped power utility to seek funding from the private sector through the sale of a 30% equity stake in Eskom, which should be listed on the JSE.

“A public-private partnership of this nature will raise billions of rands, strengthen Eskom’s financial position, introduce skilled board members to the parastatal, and improve overall management of Eskom,” said Mackay.

CBN however wonders how long it will be until we see Eskom reapplying for massive increases, this time with a stronger case.

By Jenni McCann


Business Day
Fin 24

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