The Organisation Undoing Tax Abuse (OUTA) wants National Energy Regulator (NERSA) to prioritise saving the economy rather than granting Eskom a massive price increase.
“Eskom as it currently operates, cannot survive financially in any plausible future scenario and should be unbundled and restructured before it drags the South African economy down with it,” says Ted Blom, OUTA Director for Energy in OUTA’s submission to NERSA on Eskom’s revenue application, suggesting that Eskom be split into a generation business and a transmission business.
OUTA’s submission, sent to NERSA on Friday 13 October 2017, argues that Eskom should not get any increase. Eskom wants a 19.9% price increase to fund a 7% revenue increase.
OUTA believes that if Eskom had planned the new power stations properly at the original cost of R93 billion, then the price of electricity shouldn’t be more than 40c/kWh.
Instead, Eskom’s inefficiency, corruption and mismanagement led to costs spiralling out of control and consumers reducing demand for electricity.
“Eskom is not an efficient operator and hence is not legally entitled to any additional cost recovery,” says OUTA’s submission.
OUTA believes that Eskom is trying to defraud NERSA and electricity consumers in its revenue application.
Eskom claims more than R6 billion for Independent Power Producer (IPP) expenses it knows cannot be incurred during 2018/2019. “This is fraudulent in that firstly they are refusing to sign, therefore none or only a few projects will come and, secondly, even if all are signed, almost none will be commissioned in time to impact this revenue application time period. Eskom knows all this,” says OUTA.
Eskom also claims more than R25 billion for generation projects that do not exist.
“Eskom is claiming R45 billion for generation new build in 2018/19 saying Medupi and Kusile makes up about R20 billion,” says OUTA.
However there are no other projects under construction. “This is fraud, either by lying about what is spent on Medupi and Kusile or by trying to create a slush fund.”
The revenue application is also flawed by the lack of transparency.
“Transparency is not negotiable,” says OUTA.
This is a problem on two levels. Firstly, Eskom hasn’t been honest about the cost of corruption – including the widely known R1.6 billion paid to McKinsey and Trillian for no clear benefit – and failed to remove these costs. “By endorsing this application, NERSA will be granting the Eskom corruptors a 20% increase in revenue that can be stolen,” says OUTA.
Secondly, the application process itself is flawed because NERSA published Eskom’s application with sections of information blacked out, contrary to a published decision on this in July.
“South Africa’s economy can no longer be captured by deliberate and fraudulent over-forecasts which guarantee Eskom massive price increase (its own projections run at 20% per year for five years) – which must then be funded by an embattled public with little recourse from an unsympathetic and seemingly biased NERSA,” says OUTA.
“Based on the above, it is our contention that a zero % increase is justified.”
In the last days before NERSA’s deadline for comment on 13 October, OUTA set up a link to enable supporters to e-mail NERSA about Eskom’s application. More than 16 000 members of the public used the link to send their comments.
OUTA is a proudly South African non-profit civil action organisation, comprising of and supported by people who are passionate about holding government accountable and improving the prosperity of South Africa.