Eskom should first implement a turnaround strategy before the National Energy Regulator of South Africa (Nersa) considers granting it a tariff hike, says the Organisation for Undoing Tax Abuse (Outa).
“Eskom leadership must institute stringent measures to recoup the billions of rands siphoned out of the utility through corruption and maladministration to get immediate reprieve on its cash flow/liquidity challenges,” Outa head of energy Ronald Chauke said during public hearings, in Cape Town, on Monday.
Nersa on Monday started public hearings into Eskom’s application, under the Regulatory Clearing Account (RCA) mechanism, to recover R66.6-billion in costs already spent in the provision of electricity.
The RCA allows Eskom to adjust for over or under recovery. This is then reflected in electricity tariffs in the following year or subsequent years.
Chauke said the civil society organisation was still concerned about the “rampant corruption” that had plagued Eskom, as well as its weak adherence to corporate governance.
“People can’t do as they wish with State-owned institutions. It is not their tuck shop to do as they wish.
“In making its decision, Nersa must take into account the fact and reality that Eskom has been experiencing major structural challenges which can’t be addressed by merely raising tariffs, but require a holistic approach spearheaded by government,” Chauke told the first session of countrywide public hearings.
He said Eskom should show clean and independent reporting, an enhanced regulatory framework and a primary energy procurement strategy.
He added that Outa remained concerned about a lack of transparency on coal contracts, the inefficient procurement of coal and poor plant performance, especially due to systemic and chronic breakdowns.
He said paying different prices to different mining houses had led to a “breeding ground for corruption and prices that could be detrimental to economic development” and also created barriers of entry into the industry.
“The expiry and introduction of new coal contracts, more so the long-term contracts, have not been disclosed, making it difficult for stakeholders to provide objective inputs and analytical comments on these RCA applications.”
Chauke said the procurement process for coal had translated into increased costs of corruption and maladministration amounting to R96-billion.
Outa is also concerned about Eskom’s personnel productivity, which it says has declined by 35%, from 7.1 GWh/y per person in 2007 to 4.6 GWh/y per person in 2017, as a result of an increase in headcount from 32 674 to 47 658 over the same period. It says output has remained “relatively flat” for the same period.
Outa has called for Nersa to have better oversight over Eskom.
“The build programme has exorbitant cost overruns. It is not closely or regularly checked by Nersa. We strongly recommend that Nersa should at least rigorously monitor the expenditure quarterly, and a report be compiled to ensure prudency and efficient capital expenditure.”
In his submission, Ted Blom of Mining and Energy Advisors, said RCA applications should be scrapped until a full independent forensic report on Eskom had been presented. “It is not possible to go forward without one.”
He questioned how much of Eskom’s R66.6-billion claim to Nersa was due to “deliberately inflated forecasts and over-invoicing”.
“If you are not sure what is going on beneath you, surely you need a full forensic audit. You can’t burden the public with guesses. We need facts.”
Blom said his calculations had showed that R1.3-trillion was missing from Eskom and that the correct price of electricity should be “no more than” 40c/kWh.
He claimed that Eskom was “still captured and leaking cash massively”.
Blom called on Nersa to implement a model or dashboard to cross-check information provided by Eskom.