SAFTU REJECTS NERSA’S TARIFF APPROVAL
In September 2022 when the National Energy Regulator of SA (NERSA) was conducting public hearings regarding Eskom’s proposed 32% tariff increase, the South African Federation of Trade Unions (SAFTU) firmly opposed that travesty.
We still oppose the approval of vast 18,65% tariff hike, as it will devastate the budgets of poor and working people, especially women, and Eskom’s strategy is still aimed at generation privatisation without genuine decarbonisation.
And Eskom has been so badly managed and regulated, that giving it more money without full transformation is a recipe for failure. Eskom has blown more than R700 billion on capital expenditure since 2007 but produces 25% less electricity today than then. The money has gone mainly to pay for the corrupt, skorokoro Medupi and Kusile coal-fired power plants, for which Eskom owes most of the R400 billion in its liabilities, to lenders (like the World Bank and Western governments’ import-export banks) which should be cancelling it on grounds it is “Odious Debt.”
This latest tariff increase should be looked at from a long-term perspective. Combined with increases in the past 15 years, the electricity tariff is more than 800% higher than 2007. Hence electricity has become unaffordable for poor and working-class people. We are especially angry that it is South African women, who mainly take care of our homes, cooking and child-rearing, who must resort to supplementing electricity with firewood, coal, paraffin and gas stoves and heaters. Alternatives to electricity may be cheaper in the short-term but they create indoor air pollution, which is much costlier to health in the medium-term.
These tariff hikes are the main contributor to the ever-rising cost of living. In 2022, the average food expenses for a household of four grew by more than R400 to an estimated total of R4 853, whilst electricity consumption of 350 kWh increased by R50 to a total of R787, 50 according to the Household Affordability Index.
In addition to electricity and food, fuel has increased dramatically in the past year. Petrol prices (93 unleaded) are still 40% above what they were on the eve of Covid-19 pandemic in March 2020. The fuel price increases have pushed up the prices of commuter transport such as buses and taxis, as well as of home cooking and heating expenses.
Interest rates have increased by 350 basis points, causing a 50% percent increase to the prime lending rate in the past year. This increase has made interest on loans and credit facilities much more expensive. Credit cards, home loans and bonds have become prohibitive as a result, triggering more consumer credit defaults.
Paying for food and electricity now costs way more than the national minimum wage, earned by about half of the workforce in the country. Additionally, workers’ wages are being suppressed across the economy, and consequently, even the wages of those earning above the national minimum wage are losing their buying power. This means any increases in the costs of electricity and food, fuel, transport, hygiene products, etc., is making the living conditions of ordinary workers worse and unaffordable. Even for so-called middle-income earners, 80% of their salaries are depleted within 5 days of receiving the income due to the rising cost of living.
Previously, we pointed out that the increases in electricity tariffs are unjustified and are inflicted on the working population when the costs originate from the failures of the Eskom management and government.
The operational failures of the Eskom management to fix the existing coal fleet has led to increased idling capacity, where over 15 000 megawatts of capacity is constantly out of use. And with loadshedding implemented nearly without interruption since September 2022, that idling capacity has increased, arising from the failures of Eskom management to fix and maintain the existing coal fleet, and to open up major
transmission networks to the Northern Cape where the best solar energy potential remains untapped as a result.
Consequently, Eskom resorts to burning diesel, because of this failure to compensate the poorly-maintained coal fleet’s decline and the terribly slow rise of renewable energy. The unfortunate by-product of this is that diesel costs are pushed higher, which in turn, are passed onto consumers through electricity tariffs.
Worse, the emergency fuel supplies required when load-shedding incidents – as well as load-reduction in the poorest dorpies and townships – peak, are not readily available from a Treasury whose main constituencies are obviously those who care only about budget deficit targets: financiers and the international credit ratings agencies that are their enforcers. Treasury’s austerity policies are destructive across the board, but since failure to permit emergency fuel purchases in turn cause the economy to shrink and therefore tax revenues to decline, Finance Minister Enoch Godongwana is at his most destructive.
The tendency to pass costs onto consumers through extreme electricity pricing – in contrast to major corporations (BHP Billiton’s South32 and Anglo American Corporation) benefiting from low-cost Special Pricing Agreements – reflects the ideology of structural adjustment adopted by the ruling African National Congress (ANC) from the mid-1990s. Having taken a path of neoliberalism, the ANC went on to mandate fewer cross-subsidies to poor people in its 1998 White Paper and to corporatise Eskom in 2001/02 so that it follows a profit motive, not the public interest. This step completed the process that had begun in 1984, under apartheid, to commercialise Eskom. It meant Eskom had to mainly survive on its balance sheet – including with foreign-currency loans that during the 2010s became unaffordable – rather than being recapitalised by government as was the existing practice.
The neoliberal structural adjustments at Eskom are contributing to these tariff hikes. The unbundling process which has unleashed the privatisation of the generation division of Eskom, has introduced Independent Power Producers (IPPs), from whom Eskom
procures electricity. They have, notoriously, charged Eskom vast profit mark-ups on the early “bid windows.”
Now, to make matters even worse, the fragmentation of Eskom caused by splitting it into three parts, means an underfunding of transmission lines to sites where renewable energy installations are most efficient and profitable, especially the sunny Northern Cape, and for wind, the Eastern and Western Cape provinces.
The IPP strategy has now nearly ground to a halt, with bid window 6 supposed to have added contracts to build 5.2GW of capacity (around 20% of typical consumption), based on 56 potential projects bidding to put in 96GW of solar and wind power. But only five bidders – providing only 860MW – have been approved, thanks to Eskom’s failure to build out transmission. A Business Day columnist explains, “Eskom says that its capacity forecast has been used up by private sector off-taker projects. These are new generation projects by large industrial users. Somehow, between Eskom’s grid forecasts, and the IPP bids, Eskom signed agreements with private-sector operators that swamped its capacity in two critical provinces.”
This is yet another reason electricity-generation privatisation is failing the society. Eskom CEO Andre de Ruyter’s imminent departure may allow a less-biased approach, one that would not have let the mega-polluters – mostly with relatively low labour-intensity – use so much electricity and take so much electricity-transmission power within the existing grid. (Eskom’s Transmission Development Plan suggests the need for R72 billion, to pay for about 3,000 km of high voltage lines and 60 new transformers through 2027 – but it claims not to have capital investment resources, due to fiscal austerity and repayment of corrupt Medupi and Kusile loans.)
In September 2022, nearly a third of the 32% tariff hike request was due to procurement of electricity from these IPPs. Having complained of skyrocketing input costs (because the Russian invasion of Ukraine caused an energy crisis and in turn, a soaring demand for solar and wind generation), the IPPs are renegotiating their supply prices to Eskom. These will have additional inflationary effects on consumer prices for the future.
SAFTU has long registered its opposition to the political economy of neoliberalism which amongst others include the privatisation of Eskom. We continue to reiterate this position to defend and save public ownership of energy provision and avoid ever-increasing electricity tariffs. If it were transformed, only Eskom can rationalise the national grid so that supply of desperately-needed solar and wind energy does not follow the profit motive, but the public (and environmental) interest.
SAFTU is calling on government to ensure that:
The crisis of Eskom and energy provision is part of a host of crises that have gripped the country, with corruption and austerity, record unemployment and poverty. Resulting from the sum of these problems, violence in communities and corruption induced
assassinations such as the attempt on Prof Sakhela Buhlungu’s life have increased, and are indicative of the failed neocolonial capitalist state we are at the brink of.