19 January 2016

South Africa: Eskom Must Cut Own Costs Before Demanding Hikes - Chamber

The Cape Chamber of Commerce and Industry (CCCI) told Eskom on Tuesday to bring its own costs under control before asking business and customers to pay increased tariffs.

Addressing a panel of the National Energy Regulator of SA (Nersa), CCCI executive director Sid Peimer said the chamber could not support the full tariff increase as "2016 will be a tough year for business".

Nersa is continuing public hearings on Eskom's application for a R22.8bn adjustment for its 2013/2014 financial year. If this is granted, it is expected to lead to a 16% tariff hike, the City of Cape Town told the panel on Monday.

The regulatory clearing account application by Eskom is for cost recovery and revenue adjustments based on actual past variances and not a revenue application based on future estimates. The power utility's application regarding the 2014/2015 financial year will come at a later stage.

Peimer criticised Eskom, saying it has a long history of overstating its demand expectations and making aggressive forecasts.

"It's a simple economic principle that when things get more expensive, people use less," he said.

Peimer said the utility's overuse of its open cycle gas turbines was a matter of bad management and that the use of cheaper illuminating paraffin would have been a better option.

"Business and the South African consumer must now pay for Eskom's mistakes," he said.

Peimer also called for greater transparency in procurement, citing differing prices of coal and diesel and the issue of middlemen.

Source: Fin24

South Africa

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