DA delivers memorandum opposing Eskom's 25.3% tariff hike request
01 April 2015
Note to editors: The following remarks were delivered by DA Parliamentary Leader, Mmusi Maimane MP, outside the Public Enterprise Ministry in Pretoria today, where the DA submitted demands for addressing the exorbitant electricity tariff increases requested by Eskom. Maimane was joined by Shadow Minister for Public Enterprises,Natasha Mazzone MP, Shadow Minister for Energy, Gordon Mackay MP, and Gauteng Provincial Chairperson, Solly Msimanga MPL.
The DA has this morning submitted a memorandum to the Minister of Public Enterprise, Lynne Brown, demanding her immediate action to act on Eskom's exploitation of South Africans through requests for a further increase in electricity tariffs.
The Democratic Alliance (DA) recently confirmed that Eskom is in the process of applying to reopen the electricity tariff determination process, this time requesting a massive 25.3% tariff increase.
This is despite the 12.69% increase for consumers, and 14.25% for municipalities, that has already been granted for the 2015/16 financial year by the National Energy Regulator of South Africa (NERSA).
We are here today to tell Minister Brown and Eskom that South Africans will not tolerate electricity tariff increases, far above inflation, to fund the administrative incompetency and waste at Eskom.
A 25.3% increase will only exacerbate the burden of the electricity crisis and load shedding on citizens. Eskom's continued exploitation of South Africans places upward pressure on inflation, hurts consumers and undermines economic growth.
Instead of taking prudent measures to bring the electricity crisis under control and contain costs, Eskom is simply shifting the burden onto South Africans who are already suffering from the increases in taxes and levies in the 2015/2016 budget. Households are being forced to cut back on other expenses to keep the lights on, while businesses are suffering as profits plummet and their ability to create jobs declines.
The end result is that South Africans are being increasingly squeezed to make up for an ineffective and corrupt government and its parastatals.
We have therefore compiled a list of five demands that the Minister should implement as a matter of urgency:
1. Prevent Eskom from exploiting South Africans through above-inflation tariff requests
While inflation over the past seven years has averaged out at 5.8%, Eskom has been granted an average tariff increase of over 20% per annum since 2008. This is far above the 8% per annum increase agreed to by NERSA in Multi Year Price determination (MYPD3) running up to March 2018.
The DA understands the need for electricity tariffs to be cost reflective, but these drastic increases cannot be justified so long as Eskom is being mismanaged, and government bailouts are being squandered.
Consumers whose income is growing at the pace of inflation simply cannot keep up with electricity prices that increase at a rate that is almost triple inflation.
2. Stop the payment of exorbitant salaries and bonuses to Eskom executives
According to Eskom's 2014 integrated report, its CEO took home R15.36m in the 2013/14 financial year, compared to R8.46m in the 2012/13 financial year.
Moreover, during the past 7 years since load-shedding began, executives have received R63 million in performance bonuses. An additional R11 million in bonuses was paid to executives this year.
It is indefensible to call for an increase in electricity tariffs while Eskom's top executives receive exorbitant salaries and bonuses for non-performance. If these are performance bonuses, the question has to be asked what performance is being used as justification? So long as load shedding continues to be a burden on our people and our economy, the notion of bonuses is absurd.
3. Make the procurement processes for diesel and coal transparent to minimise corruption and wasteful expenditure
Eskom is spending R2 billion per month on diesel supplies to fuel the turbines it utilises to minimise load-shedding. This emergency measure has now become standard practice to keep the lights on in South Africa, driving the cost of electricity generation up dramatically.
Until such a time as the need to run diesel-fuelled turbines has been minimised, it is vital that Eskom sources the cheapest fuel available. Making the procurement process more transparent would assist a great deal in reducing the price thereof. The Minister must ensure that middle men, benefiting from dubious tenders, do not enrich themselves at the cost of consumers.
The same, transparent approach should also be followed when procuring coal. Eskom was recently implicated in a report that it intended to purchase more than R3.7 billion worth of coal of an incorrect quality. In order to use this coal, it would have had to undergo a process of ‘blending down,' at great additional cost.
Eskom simply cannot justify requesting a tariff hike while its internal processes result in wasteful and fruitless expenditure.
4. Make detailed maintenance reports public and establish tangible key performance indicators (KPIs) for managers
It is in the best interest of the portfolio oversight committee, government, and the public to have a full and accurate depiction of the state of affairs at Eskom. The parastatal cannot be held to account so long as it continues to hide the truth about the scope of the crisis it is facing.
There is still a major backlog of maintenance issues at most, if not all, Eskom power plants, as well as with the grid itself. The continued failure by Eskom management to actively address these is one of the main causes of unplanned outages that necessitate load shedding, and the continued use of diesel-fuelled turbines at great cost.
The Minister should make the maintenance records of Eskom public as a matter of urgency. Furthermore, she should establish tangible KPIs for managers that encourage a prompt response to maintenance issues and getting rid of the backlog. Managers should be held to account for allowing the situation to deteriorate to the state we find ourselves in.
5. Launch an independent inquiry into the mismanagement of Eskom
It is clear that the main cause underlying the need for massive tariff hikes is the mismanagement of Eskom. Wasteful expenditure in areas such as remuneration and procurement are sapping the company of vital resources, and widening its budgetary deficit, while the lack of proper maintenance leads to constant unplanned outages.
We demand that the Minister launch a truly independent inquiry into the mismanagement of Eskom to identify how the parastatal can be streamlined, corruption and waste eliminated, and costs cut. If government is insistent on propping up the Eskom monopoly, then it should at least be frank about the fact that the entity is clearly not functioning at optimal capacity.
The Minister should allow an indepdent, expert panel to evaluate Eskom and report back to Parliament on how the crisis can be addressed.
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Energy is the lifeblood of our economy. As long as this crisis continues our economy will not proposer, we will not see an increase in jobs and we will not be closer to tackling poverty in our country.
Increasing the price of electricity so dramatically only serves to add insult to injury to consumers and the economy, who are already suffering from the effects of load shedding.
We call on Minister Brown to act decisively on the matter and implement the demands of the DA for the sake of all South Africans.
Issued by the DA, April 1 2015
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