Page 3 - Energize February 2022

FROM THE EDITOR:

How can Eskom receive the

money it needs without

overburdening electricity users?
by Roger Lilley, Now Media

ast month we questioned whether 2022 would be the last Under pressure to keep the lights on, Eskom burns more coal
year of loadshedding since extra power should be added and diesel each year at enormous cost, due to the deteriorating
Lduring the year. Unfortunately, the deadline for the so-called performance of its generating plant, the utility’s CFO, Calib Cassim,
“emergency” power has been extended again, so power from that has admitted.
source seems no closer now than when it was first mooted, and This decision increases the utility’s costs and adds to its already
load shedding is very likely to continue beyond 2022. unacceptably high level of greenhouse gas emissions.
No one can afford a 20,5% increase in electricity tariffs. Yet this is
This month we pose the question of how Eskom could receive what Eskom says it needs to keep going and to maintain its plant.
the money it needs without overburdening and alienating This means quite simply, that Eskom needs more money than the
electricity users. average user can afford – or is willing – to pay for electricity.
Eskom has applied for a 20,5% tariff increase. But the risk is that more people will default on their bills,
Firstly though, we must state that although Eskom has increasing Eskom’s outstanding arrear debt; and that more people
applied for such an increase, it has not yet been approved by the will defect to some degree from the grid by switching to alternative
energy regulator, Nersa. We will only know Nersa’s decision – sources of energy such as liquid petroleum gas (LPG) for heating and
and the actual tariff increase to be imposed – towards the end of cooking, and to solar geysers for hot water.
this month. So we have an impasse. A conundrum.
Comments by the public on radio talk-shows, and those made As any businessman will tell you, raising the price on your goods
by energy analysts and experts, reflect the view that a 20,5% does not guarantee more revenue. Customers can choose to use less
tariff increase would be outrageous because it is far higher than electricity. They have already demonstrated that by the simple act of
inflation and totally unaffordable for most South Africans. switching to low-energy appliances and lights.

Why has Eskom requested such a steep increase? How is Eskom to receive the money it needs without overburdening
Eskom says that because Nersa has, for many years, consistently and alienating electricity users?
approved a tariff increase lower than what Eskom had requested, Some have suggested that government, as the utility’s sole shareholder,
the power utility now finds itself in a financially unsustainable should absorb the almost R400 billion debt, thereby freeing Eskom of
position. This means that to become sustainable, higher than this burden and allowing it to operate on lower electricity tariffs.
inflation increases must now be applied. Others have suggested an “energy bond”, which investors would buy
However, part of the problem lies with Eskom. Significant over- and receive an annual dividend, or a pay-out after five years, or some
runs on the construction of its two mega power stations, Medupi similar scheme. That money could be used, its proponents suggest, to
and Kusile, have left the utility with an enormous debt burden. help Eskom pay off its debt more quickly and survive on lower tariffs.
According to Eskom, a large portion of the revenue Still others have suggested that Eskom immediately close, and stop
received from the sale of electricity goes to service that debt. spending money on, its five oldest and least reliable coal-fired power
The organisation is then left with less money to spend on stations, and focus on getting its newer, more reliable power stations
maintenance. The shortfall is so severe that Eskom has admitted repaired properly so that they could meet the needs of the country.
that – for mostly financial reasons – it has to postpone a quarter What is the ideal solution? Higher tariffs or some other more
of its planned maintenance to the next financial year. creative solution?
Another part of the problem is in Eskom’s inability to collect
outstanding arrear debt. The organisation is owed a whopping Drop me an email to rogerl@nowmedia.co.za with your suggestions.
R41 billion by certain municipalities and direct customers. I look forward to hearing from you.

energize | February 2022 | 1