PRETORIA (miningweekly.com) – Trade union Solidarity on Monday again urged the National Energy Regulator of South Africa (Nersa) to investigate the coal industry according to the Electricity Regulation Act.

Speaking at public hearings into Eskom’s 34% interim tariff increase application, Solidarity deputy general secretary Dr Dirk Hermann questioned whether the cost drivers highlighted by Eskom in its application were a real reflection of actual costs.

Eskom CEO Jacob Maroga said at the public hearings in Pretoria, that primary energy costs, mainly for coal, were higher, explaining that the utility had to buy more coal on a short-term contracted basis.

Hermann estimated that primary energy costs, mainly coal, were 81% higher than in 2007/8 and 45% higher than in 2008/9.

The union noted that a number of major coal producers had achieved significant increases in revenues, operating profits and net profits from selling coal.

Hermann stated that this led to questions about whether there was collusion or abuse of dominant positions within the coal industry. He said that should Nersa conduct an investigation and, should it find evidence of anticompetitive behaviour,  it should hand over cases to the Competition Commission.

The union had highlighted this concern in 2008, when public hearings were held into Eskom’s tariff increases.

Further, Hermann noted that Eskom’s personnel costs would also increase by around 40%, when compared with 2007/8. This despite staff numbers declining slightly.

The union stated that, in general, cost increases at Eskom seemed to be “out of control”.

Hermann commented that it was difficult to make a meaningful suggestion in terms of Eskom’s tariff application, given that up-to-date information was not available.

However, it believed that Nersa should award Eskom a 12% tariff increase, which took into account what was necessary for the power utility’s operational requirements in the short term, while further clarity could be provided in terms of the higher coal and personnel costs.

This would also exclude costs relating to demand-side management, as this should be government’s responsibility, the union noted.

Further, Hermann said that the expansion of infrastructure was the responsibility of government and not of the consumer.

Consumers could, at most, finance the shortage of about 7% in reserve capacity, and if this was exceeded, the customer would be playing the role of the shareholder, which should entitle consumers to get shares in the utility, he added.

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