Tariff increases will not save Eskom unless the organisation comes to grips with costs

Tariff increases will not save Eskom unless the organisation comes to grips with costs that appear to be rising out of control, says the Cape Chamber of Commerce and Industry.

“A quarter of Eskom’s generating capacity is off line undergoing maintenance or being repaired after breakdowns yet the costs continue to rise,” said Ms Janine Myburgh, President of the Chamber.

Over a period of six years primary energy costs (mainly coal) increased from R19 billion to R70 billion. That was an annual increase of 24.3 percent which is roughly four times the rate of inflation.

“We need to ask some serious questions about these costs because there are allegations that Eskom is paying something like four times the going rate for coal from some BEE companies,” said Ms Myburgh.

The Chamber has always supported BEE and it understood that there would be additional costs from smaller suppliers, but these should be kept within reasonable limits. The best way to do this was to be transparent about the prices. “This is not commercially sensitive information. It’s about public tenders and the prices and quantities should be public knowledge.”

We have also heard some shocking stories about diesel purchases from some unlikely middle men. We need to know what Eskom is paying and why it cannot buy directly at wholesale prices, discounted for bulk purchases.

A previous CEO of Eskom, Brian Dames, said power from the open cycle gas turbines which run on imported diesel cost between 16 and 18 times more than the electricity from coal power stations. “The picture might have changed a little with the recent drop in oil prices but it is still massively expensive, especially when we have natural gas off the West Coast. Eskom has talked about using gas but nothing has happened yet.”

Mr Peter Haylett, chairman of the Chamber’s Industrial Focus portfolio committee, said the problem with Eskom’s ever increasing tariffs was that they made alternatives more viable and businesses and home owners were now turning to solar power to supplement their electricity supply. “If you generate, say, 30 percent of your electricity from solar panels that is 30 percent you don’t have to buy from Eskom. Companies are going solar because they can control the costs and they are already finding that their own solar electricity is cheaper than the retail price of electricity from the municipalities.”

He said technology was improving rapidly and if Eskom continued to increase tariffs it would lose customers. Grid electricity is getting more expensive and off-grid is getting cheaper. “This can only end one way. Who will buy the expensive electricity from the new power stations when they finally come on line?” Mr Haylett asked.