The South African Local Government Association (Salga) has rejected Eskom’s appeal for a 15% tariff increase over the next three years, saying the utility is "out of touch with reality".
“There is already too much burden hanging over South African customers. We can’t expect them to pay,” Salga head of electricity and energy Nhlanhla Ngidi told the National Energy Regulator of South Africa (Nersa) during the first day of three-week, countrywide hearings into the multiyear price determination (MYPD 4) revenue application for the 2019/20 to 2021/22 financial years.
Ngidi said municipalities were also battling and were experiencing negative growth.
“Salga appreciates and sympathises with Eskom’s financial challenges, but everyone is going through this. There are no holy cows.”
Ngidi agreed that "delinquent municipalities" owed Eskom a lot of money, but said they were also battling with low sales.
“Eskom is going through this predicament. But so are we.”
He said higher prices would motivate more affluent customers to leave the grid and use solar and other energy sources, while it would hit the most vulnerable, the working class and the unemployed. It would lead to greater levels of nonpayment.
“As a result municipalities are not going to recover enough to pay Eskom and we will be going through the same debt spiral.”
Ngidi said higher tariffs would also push people into using more dangerous forms of energy, such as paraffin "which has destroyed many townships and devastated many lives in recent fires".
He said commercial customers would continue their investment in their own energy sources independent of municipal and Eskom supply.
Ngidi said it was not fair to expect customers to pay more if Eskom was earning less through weaker sales.
“We cannot keep punishing customers for lower demand and fewer purchases that are inevitable and not their fault.”
Ngidi said Eskom needed to rethink its model in the long run and cease being a monopoly. It also needed to look at future trends, he suggested.
He pointed out that several shopping malls were moving off the grid, with prices of battery storage poised to come down further.
“Change is coming, versus us trying to increase tariffs.
“We entrust Nersa to make the right decision, which includes affordability, universal access and also allow the utility to recover its costs with reasonable margins.”
Salga has also called on Eskom to cut costs within the entity.
“Consideration should be given to new conditions of service that remove some of the old benefits that escalate costs without any value add.”
Salga suggested that a strong stance should be taken to introduce major austerity measures throughout Eskom that would significantly contribute to reducing overheads over the longer term, in order to maintain the viability and financial sustainability of the entity.