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Treat Eskom like a national crisis, instead of putting more money down the well



Eskom’s inability to deliver and rising rates should be addressed as a national crisis, as higher prices will not help solve the problems, according to the Organization Undoing Tax Abuse (Outa).

The pick-a-price solution used by the National Energy Regulator (Nersa) is also not a solution.

In response to Nersa’s decision to raise electricity prices by just under 10% after Eskom asked for 20%, Outa says the price increase should be blocked and replaced with urgent efforts to provide solutions to the Eskom crisis.

“We don’t think the 10% increase should be allowed on top of the money it will receive as a rescue package,” said Liz McDaid, Outa’s parliamentarian and energy adviser.

“Nersa has done what it normally does: look both ways and take the middle: 10% instead of 20% that Eskom wants or 0% that the public wants.”

ALSO READ: Bad news for you, worse news for Eskom – Nersa limits rate increase to 9.61%

No reasons for choosing a price

McDaid says Nersa’s pick-a-price solution was delivered again for no reason.

“NERSA should apply its spirit. We ask nothing more than inflation. Thursday’s budget provided some tax cuts designed to keep the cost of living low, but this electricity increase will have an impact on the cost of living.”

It’s also unclear whether Eskom will get further hikes pending the resolution of any pending chargeback cases that could trigger more price hikes, McDaid says.

While South Africa cannot afford Eskom collapsing, individuals and businesses cannot afford to lose access to basic services that are increasingly expensive, on top of the government’s annual bailouts. McDaid says simply increasing the price of electricity is not the solution, nor is transferring Eskom’s debts to the government.

“Eskom, the ministries of public enterprises and mineral resources and energy must cooperate and work in the same direction. The recently published draft Electricity Pricing Policy Bill and Electricity Ordinance Amendment is moving in the right direction, although there are some challenges.”

ALSO READ: Nersa grants Eskom only 9.6% increase still bad for economy, consumer

This is what the government should do about Eskom

Outa suggests that Eskom and the government work on:

  • Progress with the restructuring of Eskom
  • Progress with the unbundling of Eskom
  • Quick unbundling of Eskom Generation
  • Sell ​​non-core assets
  • Selling some core generation assets to repay debt
  • Adopting non-government shareholders to recapitalize the entities with non-government capital to repay debts
  • Selling loss-making core distribution assets, such as Soweto and other underperforming areas to entities that can do things better, reduce losses and raise money to pay debts
  • Listing the unbundled entities on the JSE to take on non-government shareholders, raise capital and reduce debt
  • Improving procurement to reduce waste and reduce corruption and mismanagement
  • Reducing staff and wages and improving efficiency and productivity
  • Replacing underperforming plants with cheap new plants (wind and solar energy and flexible generation capacity)
  • Reducing electricity theft and non-payment
  • Improving revenue collection and reducing debt arrears, especially from municipalities
  • Reducing cable theft and vandalism through better asset protection
  • Implement more effective maintenance
  • Foreclosure from the carbon tax and electricity levy on electricity paid to the government by Eskom from coal production and use it to improve energy efficiency and off-grid electricity
  • Use the electrification subsidies to Eskom and municipalities to supply households with electricity off-grid.

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