The NERSA Hearings: Time for an Autonomous Energy Movement

By Saliem Fakir · 1 Feb 2010

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Picture credit: mdezemery
Picture credit: mdezemery

The truth must be said: NERSA was merely going through the motions when it conducted public hearings on electricity price hikes. Ultimately, it is the Treasury and cabinet that decide what can be afforded or imposed on the public. NERSA merely manages stakeholder consultation.

There is no real Chinese Wall within South Africa’s electricity sector, which is one of the major electricity governance problems we face. And, as it is well known in the industry, everybody talks to everybody – the players are referees and the referees, players.

There will be a price hike and it is more likely to be in the 25% range. Nevertheless, there should have been incremental price hikes over the last 15 years rather than the shock-therapy approach presently being taken.

Price hikes should have also been gradually accompanied by a national culture of thrift -- meaning using less energy, but doing more with it.

But the hearings were filled with a plethora of contradictions and hypocrisies from one end of the spectrum to the other. Ultimately, the deep mess we are in emanates from a national culture of complacency as well as one party waiting for the other to do something.

The first line of cynicism draws attention to how business lobbies have been sanctimoniously critical of price hikes in the name of jobs and the poor. But business also accumulated capital and expanded into Africa because cheap electricity subsidised generous profit taking.

At the same time, average wages were suppressed compared to the average wage of top management and CEOs. The subsidisation of profit has seen no benefits transferred to the pockets of workers, nor consumers.

Indeed, business has a lot to lose in terms of profits. Business Unity South Africa estimates that a 35% price hike will involve an R80bn loss per annum for business.

At present, the biggest consumers of electricity are not the poor, but large user groups like mining, smelting and other large industries. Yet the poor will be made to pay the most.

No doubt electricity price hikes will have inflationary effects and possibly lead to job losses. But price hikes may well be the neat excuse for more retrenchments just as the financial crisis has been. One doesn’t know what to believe anymore.

Investments in energy saving and alternative energy were not to be seen either. 

Business could have used its influence to look ahead, like it does so well for its own profits and see that the current model of energy security will only lead to disastrous consequences for all. Business should have pushed government to implement a more robust model. Where was the leadership that it is seemingly exercising so belatedly?

Business should at least play its part by being more energy efficient and should rather use price hikes to boost efficiency levels instead of lazily transferring price increases on to customers.

The second area of hypocrisy is to see how our parastatals have become convenient platforms for self-enrichment. One wonders how much the price hikes also involve an eye on generous bonuses?

The recent filing of a claim for unfair dismissal and loss of earnings by former Eskom CEO, Jacob Maroga, raised eyebrows. He wants to claim a whopping R85m from the state. This merely illustrates how corporate incentives in state enterprises have encouraged rent seeking and a corrupt culture of self-gain at the expense of the proper and judicious management of public assets.

The question of Eskom’s efficiency and better planning of electricity supply through a more robust energy mix received scant attention at the hearings. The public can’t be forced to fund poor performance without some accountability.

Morale in Eskom is low anyway. Eskom needs to be fixed as much as its tariffs.

Thirdly, while Eskom is getting all the bad publicity for its request for higher tariffs, tariff prices have escalated significantly within municipalities. The process around municipal tariff hikes remains opaque and non-transparent. It is unclear how much of the revenue stream involves municipalities taking ‘profit’.

COSATU, in its submission to NERSA, estimated that Eskom’s selling price to municipalities is likely to be about 80c/kWh, but what residential users will ultimately pay after the municipalities add their bit is anywhere between R1.08 to R1.97/kWh between the years 2010-2012, signifying a whopping 142% increase over that period.

There has been very little discussion on this issue, but the differential between Eskom’s charges and what municipalities charge residential and commercial users is ever widening.

Municipalities see electricity sales as a way of boosting income. Municipalities are no doubt going through tough times, but what they can charge or how they go about doing it, needs more scrutiny.

All this focus on the big fellow, Eskom, has conveniently diverted attention away from the audaciousness of municipal prices hikes with little public outcry.

Then there is the government itself, the owners of Eskom that continually set a bad example. The government owns vast numbers of buildings and installations. If it wants to shift the national culture to frugality, it needs to lead by example.

While it is telling everybody else to save, it has yet to show how the government has performed with regard to its own energy saving targets and plans. Its own inaction will breed public cynicism. This in turn translates into a vicious cycle and culture of complacency on the whole.

Finally, it is great that COSATU is playing a stronger role in defending workers and the poor against higher electricity prices, but it would be entirely naïve to think that low prices will be there forever.

The nature of the energy market is changing. Prices will increase and we will have to find ways to adapt. More importantly, we will have to increase the energy independence of the poor.

COSATU should move away from relying solely on state-driven approaches to a self-reliant approach if it is going to help workers and the poor beat the inflationary effects of electricity prices in the future. On this account, COSATU’s leadership has been non-existent and it has further shown no imagination. 

COSATU could take a leaf out of the book of the Bangladeshi subsidiary of Grameen Bank, Grameen Shakti (GS), which is revolutionising the deployment of off-grid solar home systems (SHS) amongst the poor in Bangladesh.

GS provides finance and sets up Grameen Technology Centres to manufacture installations, accessories and provide maintenance and services where they are needed. GS is now the largest installer of SHS in Bangladesh.

COSATU has control over large pension funds and has BEE interests. There is nothing to suggest that it can’t mobilise its own resources and influence to create the conditions for more autonomous sources of power.

The way Eskom prices are going and given its inefficiencies, conditions may well force an autonomous energy movement of its own.

Mining corporations and those in other business sectors are increasingly pushing their electricity investments in the direction of self-reliance. But, they are looking after their own interests and their moves should tell us that total dependence on Eskom will be at our own peril.

We must do both though -- fight for more a responsible public agency that can deliver affordable electricity as well as create the conditions for autonomous energy solutions within the citizenry.

Fakir is an independent writer based in Cape Town.

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