Efforts by the Democratic Alliance (DA) and the Tebeila Institute of Leadership, Education, Governance and Training to prevent the implementation of the 18.65% increase in Eskom revenue provided by energy regulator Nersa will cause irreversible economic damage, according to the utility’s CFO. Calib Cassim.
In an affidavit filed last week, Cassim called the important application, which could be heard together in early March, “simplistic and myopic”.
Also read: ‘Choose between buying food or electricity’ – DA calls for ban against Nersa tariff hike
A search of the last term shows it means ‘short-sighted’ or ‘blind as a bat’, among other definitions.
The two parties launched the application shortly after Nersa announced on January 12 that it had awarded Eskom revenue totaling R319 billion in 2023/24 and R352 billion the following year. This means an increase of 18.65% and 12.74% in the amount provided by the utility from the electricity tariff in those years.
Pressure
This is due to strong and continuous load shedding that is costly to the economy, as businesses and households spend heavily to increase their electricity supply from Eskom or face significant financial losses.
Consumers at the same time are suffering from rising interest rates, very low economic growth and rising prices especially of food products.
Nersa’s announcement led to public outcry over rising electricity costs as supplies dwindled.
Both applications were submitted before Nersa published the reasons for its decision last week.
Cassim stated that Eskom’s rates for 2023/24 have not been set yet. He said the applicants joined Nersa’s determination of revenue and tariff agreement, while the latter has yet to be done.
In addition, setting aside the revenue determination does not allow Eskom to simply continue to charge consumers at current tariff levels – it would leave Eskom without revenue. This would be disastrous and detrimental to those trying to protect applicants, as well as the economy as a whole, he said.
The poor are ‘isolated’
Cassim further pointed out that the applicants argued that the increase would affect poor electricity users, ignoring the fact that the government provides 50kWh of basic electricity free to the poor, insulating them from the increase.
In addition, many consumers who are applicants who want to protect receive electricity not directly from Eskom, but from municipalities that increase the significant margin for Eskom tariffs.
Cassim rejected the DA’s argument that by giving this latest increase, Nersa had deviated from its own policy of giving tariffs that should be subsidized by Eskom.
He explained in his affidavit that the Electricity Regulation Act, the Electricity Pricing Policy and Nersa’s own methodology require the regulator to enable efficient licensees (Eskom) to recover operating costs, plus a reasonable return on assets.
He pointed out that Nersa acted unlawfully because it had not done so for many years, as confirmed by several court rulings in favor of Eskom.
It would be a “charter for lawlessness” if the DA’s application was granted, he said.
Cassim also rejected the DA’s argument that Nersa was giving more money to failing state institutions and said the decision brought Nersa closer to cost-reflective tariffs, which would help Eskom become financially sustainable.
He pointed out that Nersa’s failure to allow Eskom to recover costs from its tariffs was a major factor in its current financial difficulties.
In order to continue operations and fulfill its tasks, Eskom reduced the shortfall by borrowing money, Cassim said.
He announced that at the end of December Eskom’s debt had reached R422 billion, with little room to increase.
Eskom’s annual and cumulative revenue shortfall after tax and interest (R billion)
This increases the pressure on the national fiscus, which guarantees the debt of 350 billion, billion that has already been committed.
If Eskom defaults on one of the loans, it could lead to the acceleration of full liability and, catastrophically, the state as guarantor, with a total liability of around R4 trillion; The R412 billion is international debt, Cassim said.
He said that as a matter of standing, Eskom expects all financial indicators to deteriorate in the coming financial year and repayment of large debts will be due in the next three years, with limited ability to borrow more.
Not a case of ‘thumb-sucking’ figures
Cassim said DA in the application created the impression that Nersa came to the decision by just thumb-sucking. But that is not the case. A significant amount of revenue is actually allowed as a result of court rulings.
He said the application was “at war with itself” as it complained about load shedding while attacking revenue increases that would help Eskom reduce load shedding.
This article originally appeared on Moneyweb and is republished with permission.
Read the original article here.
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