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DA urges Eskom to seek funding from private sector

DA urges Eskom to seek funding from private sector

Jun 30, 2015

The Democratic Alliance (DA) has lauded the National Energy Regulator of South Africa (NERSA) for its “strong and credible leadership” and for “setting the bar for how other State-Owned Entities and public bodies should conduct themselves”, as the regulator sent Eskom back to the drawing board with a rejection slip for its 25.3% tariff hike for the 2015-16 financial year.

In a press statement, the DA said NERSA’s decision should be “hailed as a victory for all electricity consumers, for our economy and for every unemployed South African”.

The DA statement read: “Despite ongoing pressure by government and the ruling alliance, NERSA demonstrated true independence today by refusing to be strong armed into exorbitant tariff increases that would have had disastrous consequences for our economy.

“It is unthinkable that Eskom expected an increase of that nature which would have been an external shock to our economy, resulting in a massive reduction in jobs, an unsustainable increase in input costs, and the unavoidable closure of many small and medium sized firms across South Africa.

“In our submissions, the DA strongly opposed further tariff increases as they would be disastrous for our economy and job creation. This was echoed in last week’s NERSA public hearings by business, unions, opposition parties and civil society

“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.

“This decision by NERSA paves the way for the long term reform of the energy sector in South Africa. The Department of Energy and Eskom should now heed the DA’s advice and seek reform in terms of breaking the Eskom monopoly through increased competition within the sector, an increased focus on renewable energy and the rejection of expensive nuclear energy.

“Moreover, the time has come for Eskom to seek funding from the private sector through the sale of a 30% equity stake in Eskom, to be listed on the Johannesburg Stock Exchange (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.”

Eskom’s proposed increase was aimed at getting R33 billion for diesel to run its open-cycle gas turbines and for buying electricity from independent power producers in terms of its short-term power purchase programme. The power utility had warned of extensive loadshedding if the tariff hike was jettisoned by NERSA.

However, unconvinced that a tariff hike was the only option for Eskom, NERSA regulator member for electricity Thembani Bukula said options such as demand side management and demand market participation should be considered and other sources of funding investigated. NERSA chairman Jacob Modise said that the current tariffs were based on commissioning dates for Eskom’s new power stations which had lapsed, and Eskom had failed to issue new dates. This meant the regulator could not properly assess the need for running the open-cycle gas turbines and the resulting economic impact.

“We want an Eskom that is viable, that can provide sufficient electricity [for] the country but at the same time we want tariffs that are affordable and more predictable and certain,” Modise said.

The National Union of Mineworkers (NUM) welcomed NERSA’s decision in a statement that read: “The current electricity prices are not affordable to the poor and are impacting negatively on them. Electricity prices in South Africa have almost quadrupled since 2007 when the country first had power shortages.”

The DA’s suggestion of 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” is one that bears thinking about. In the meantime, South Africans are somewhat relieved – and wait to see what, if anything, Eskom can pull out of the hat.

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