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African Utility Week: ‘Eskom’s inflation, unacceptable’

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Yesterday, the African Utility Week conference kicked off at the CTICC in Cape Town and is expected to be attended by various stakeholders. The conference will focus on a range of topics related to energy and water management. Yesterday’s sessions looked at the cost reflective power tariff of Eskom and the scope of decreased electricity tariffs in South Africa.

Advisor for the Mining & Energy Advisory (SA) and energy spokesperson for the Organization Undoing Tax Abuse (OUTA), Ted Blom, yesterday addressed the conference and focussed on issues related to poor policy.

In an interview with VOC, Blom explained that with poor policy you get poor regulation, low economic growth and low job investment.

His presentation analyzed in detail Eskom’s growth profit mark-up, and indicated that the Eskom’s mark-up on the cost of electricity is more than 100 per cent.

“I found that totally unacceptable, from my own perspective and from an economic growth perspective,” Blom said.

He said that in comparison to 10 years ago, following the establishment of the National Energy Regulator (Nersa), South Africa has lost in excess of three and five per cent growth in GDP each year due to growing electricity costs, which he asserts has resulted in the loss of millions of job opportunities.

“The government must not tell us that they are going to create job opportunities from thin air, since job opportunities arrive when you have a cheap basic cost of electricity, which allows you and me to start a business,” he continued.

Blom further noted that since Eskom’s numbers are aggregated, it becomes difficult to disseminate how inflation occurs. The public, therefore, remained unaware of the 100 per cent increase in electricity costs.

He said that Eskom was forced to reveal its inflation stats when OUTA took Eskom and Nersa to court on March 31, 2016. As a consequence, Nersa acknowledged exact tariff costs of generating electricity from coal.

“We were then able to add to that the cost of transmission and distribution, and in 2013 the actual tariff cost to deliver electricity to homes was below 31 cents per kWh, [while] Eskom’s revenue on electricity was 65 cents per kWh. Eskom was, therefore, making a profit of 34 cents per kWh,” Blom explained.

He said that Eskom and Nersa cite the need to prepay new power expansions as the reason for inflation, a payment system which Blom asserts has never been viable anywhere in the world.

“The only way that electricity works is with large investments that are done on a pay as you go basis – you can’t penalize this generation for future generations electricity needs.”

Blom said that the Eskom price mark-up warrants an investigation, and that OUTA intends to investigate methods of disseminating the findings to the data base of members, since OUTA has broadened its scope from E-toll issues to general tax payer abuse.




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