Union calls for competitive electricity market

(Photo: Shutterstock)
(Photo: Shutterstock)

Pretoria - The fundamental problem with the energy sector in South Africa is the monopolistic structure of electricity generation and transmission in a single entity, trade union Solidarity told the National Energy Regulator (Nersa) on Wednesday.

This is because, whatever the final decision of Nersa on Eskom’s application for increased tariffs would be, South Africans will not be able to refuse it.

Solidarity urged Nersa to protect the public from what it called "further exploitation by Eskom", and to put workable plans in place that will alleviate the energy crisis.

READ: Eskom's tariff hike request amounts to extortion - SME owner

The union was invited to share its thoughts at a Nersa public hearing held in Johannesburg on Eskom’s application for a 24.78% tariff increase.  

According to Deon Reyneke, head of Solidarity’s energy industry, the time has come for Eskom to take responsibility for its own problems.

Solidarity claimed the lack of a market for electricity in South Africa makes it impossible to judge what Eskom’s tariffs actually should be.

The union reiterated its call that a competitive market for electricity, through which prices will be determined naturally, be allowed in South Africa.

According to Solidarity, because of Eskom's "effective monopoly" on electricity generation and on the transmission network, the mistakes that Eskom and Nersa make "eventually have to be paid for by South African electricity consumers", who - save for generating their own power - have no choice but to buy electricity from Eskom.

READ: Eskom won't get tariff hike, says war room expert

Reyneke said Eskom should pay attention to the countless suggestions from the public on dealing with the current electricity crisis.

"Numerous workable solutions for Eskom’s problems, which could ultimately relieve the crisis, have been mooted. Making the public pay more for electricity, is not one of them,” said Reyneke.

“Never before has there been such fierce reaction against a planned energy tariff hike. The public, including industries and labour, are fed-up.”

Piet le Roux, head of the Solidarity Research Institute, said Eskom's monopoly on the supply of power hampers healthy competition and leads to unnatural price hikes.

“When Nersa announces a new tariff, it leaves the South African public with no other choice but to accept the deal. If they want electricity, they have to accept it. The result of the monopolistic structure of electricity supply in South Africa is that it has become virtually impossible to supply electricity competitively,” said Le Roux.

Solidarity is concerned that Eskom may be more concerned with sourcing inputs from BEE suppliers than sourcing inputs based on price and quality. The union deems this as detrimental to both Eskom and all South Africans.

“Solidarity maintains that people in South Africa should not be made to pay for Eskom’s seeming inability to negotiate fair contracts with its suppliers,” said Le Roux.

Nersa will announce the new tariff increases on Monday 29 June 2015.

ALSO READ: Over 50% chance of total blackout, Nersa hears

On Wednesday evening the National Assembly passed the special appropriation bill, which involves a R23bn bailout for Eskom.

The money would be raised from the sale of so-called non-strategic assets.

Finance Minister Nhlanhla Nene told MPs Eskom had to be rescued, ENCA reported.

The National Council of Provinces still has to approve the bill before President Jacob Zuma can sign it into law.

The National Assembly also approved a bill providing for Eskom's R60bn subordinated loan to be converted into equity, EWN reported on Wednesday evening.

It said the Democratic Alliance, Economic Freedom Fighters and the Freedom Front Plus opposed the bill.

Also on Wednesday evening, the Presidency issued a statement in view of claims made by Economic Freedom Fighters (EFF) MPs in the National Assembly against Deputy President Cyril Ramaphosa regarding Eskom.

The Presidency said it wanted to reiterate that it is a matter of public knowledge that Ramaphosa has divested from the Shanduka Group and holds no mining interests.

Ramaphosa's divestment, announced in November 2014, is the result of a process that he initiated to remove the potential for any conflicts of interest.

"Ramaphosa was assigned by Cabinet in December 2014 to lead the Eskom war room, which is focused solely on the implementation of government's five point plan to address the current electricity constraints facing the country and does not stand to benefit personally from these processes," the Presidency said.

It called on the EFF to have the courage of its conviction to substantiate its claims or withdraw them.

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