MEDIA ADVISORY

groundWork (Friends of the Earth South Africa)
South Durban Community Environmental Alliance

ESKOM’S TARIFF CLAW BACK TO CRIPPLE RATEPAYERS

Durban, South Africa, 20 January 2016 – Eskom is asking for a tariff increase of about 8.6% in its Regulatory Clearing Account (RCA) [1] application to National Energy Regulator of South Africa’s (NERSA). If granted, this will bring the total 2016 tariff hike to 16.6%, sinking the poorest deeper into poverty and darkness.

Eskom’s requests for grossly inflated tariff hikes come round every year or, as in 2015, more than once a year. The energy utility has established a pattern of late and/or repeated application stretching back to 2008. This has the appearance of a tactic to forestall public consultation and put the National Energy Regulator of South Africa’s (NERSA) decision-making under pressure.

People can tell NERSA what they think of this at public hearings this week. On Thursday and Friday this week, the hearings will be at the Durban International Convention Centre.

In March 2013, the Third Multi Year Price Determination (MYPD3) [2] decision gave Eskom an 8% annual increase for five years to 2018. This was half Eskom’s request for a 16% annual hike. In 2015, Eskom submitted a RCA request for an additional 10% to give an overall rise of 18%. NERSA awarded 4.69%, taking the total rise for the year to 12.69%.

According to David Hallowes, researcher at groundWork [3]:

“The RCA allows Eskom to recover prudently incurred costs. In our view, there has been nothing prudent in what Eskom has done over the last decade. One poor decision has led to the next and, even as new build cost escalate, is compounded by flagrant flouting of governance norms.”

Instances include:

The main items for which Eskom seeks compensation are: low sales due to load shedding; coal and diesel costs; and the Independent Power Producers (IPPs).

Desmond D’sa, Coordinator of the South Durban Community Environmental Alliance (SDCEA) [4] states: 

“For ordinary people the combination of load shedding and high bills led to job losses, children not going to school, unhealthy eating and an increase in crime. Pensioners are particularly aggrieved as the electricity bill consumes a very large part of their income.”

It is noted that free basic electricity is very unevenly applied across the country. It is supposed to be based on means testing but most municipalities do not have the capacity to do that. They either do it badly or use an arbitrary surrogate such as households with low consumption (150 kWh in eThekwini) or a 20 amp connection. It cannot be assumed that households with higher consumption or 60 amp connections are not poor. The bottom 60% of households have just 11% of total household income: more than half the people are poor.

The organisations call for a universally applied inclining block tariff. It should start with a dramatically expanded free provision adequate to real needs for the first block. The first step to paid-for electricity should be shallow with increasingly steep steps thereafter including additional steps at the higher end. The total bill for profligate consumers should rise higher than the overall price rise.

You can read groundWork's submission to NERSA here.

FOOTNOTES

[1] The Regulatory Clearing Account (RCA) process allows Eskom to ask for a higher tariff to cover cost overruns in previous years, providing that the costs were ‘prudently’ incurred.
[2] NERSA sets Eskom’s tariff for a specified period through the Multi Year Price Determination (MYPD) process.
[3] groundWork is an environmental justice organisation working with community people from around South Africa, and increasingly Southern Africa, on environmental justice and human rights issues focusing on Coal, Climate and Energy Justice, Waste and Environmental Health. groundWork is the South African member of Friends of the Earth International www.groundwork.org.za
[4] The South Durban Community Environmental Alliance (SDCEA) is a non-profit organisation which aims to, inter alia, service the common interests of participating civil society organisations, provide a common structure through which different sectors of civil society can explore, strengthen and promote matters of common interest justice or relating to environmental justice and sustainable development and create a culture of environmental justice and sustainability www.sdceango.co.za

CONTACTS

groundWork
Megan Lewis
Media and Communications Officer
Tel (m): +27 83 450 5541
Tel (w): +27 33 342 5662
Email: megan@groundwork.org.za

Bobby Peek
Director
Tel (m): +27 82 464 1383
Tel (w): +27 33 342 5662
Email: bobby@groundwork.org.za

South Durban Community Environmental Alliance
Noluthando Mbeje
Programme Officer
Tel (w): +27 31 461 1991
Tel (m): +27 78 234 6202
Email: thando@sdceango.co.za

Desmond D’Sa
Coordinator
Tel (w): +27 31 461 1991
Tel (m): +27 83 982 6939
Email: desmond@sdceango.co.za