The Cape Chamber of Commerce and Industry

January 19, 2016

A further increase in electricity tariffs will not solve Eskom’s problems and could worsen their financial situation, says the Cape Chamber of Commerce and Industry.

In a presentation to the National Energy Regulator, Mr Sid Peimer, Executive Director of the Chamber, said tariff increases would make more Eskom customers decide to turn to solar power and this would erode Eskom’s customer base.

“This is not a prediction. It is happening and at an increasing rate because it makes commercial sense. PV panels are getting cheaper and more efficient and will continue to do so.”

He pointed out that in the Western Cape there were already a number of large “own generation” solar projects from Clanwilliam and Citrusdal to office blocks in the city while the Waterfront had already installed solar panels to meet most of its future electricity needs.

He said Eskom’s main problem was that it had got its forecasts of future electricity demand hopelessly wrong and this was the reason for the shortfall in revenue.

“Good managers learn from their mistakes. Clearly, Eskom has not learned and it is still producing unrealistic demand forecasts. There is a dangerous element of wishful thinking in their budgeting. That is bad management at the highest level and business and the South African consumer is now being asked to pay for these mistakes.” the Chamber said.

The second big problem was the over use of the diesel-fuelled open cycle gas turbines which produced the most expensive electricity and which Eskom was forced to sell at a loss.

“The open cycle gas turbines are basically jet engines from the likes of Pratt and Whitney and General Electric. They are designed to run on paraffin. Why does Eskom use the more expensive diesel fuel?” This was one area where Eskom could save money.

“Our message is very simple. First bring your costs under control before you ask business and the pubic for more money to pay for past mistakes.”

If Eskom wanted to regain the trust of public it should be more transparent about its costs, especially procurement and it should justify its use of “middlemen”.

“We believe that greater transparency will lead to greater trust and a welcome improvement in relations between Eskom and its customers.”

Statement issued by Sid Peimer, Executive Director of the Cape Chamber of Commerce, 19 January 2016