Government should be more concerned about citizens unable to afford the rising cost of electricity

MEDIA RELEASE

17 JULY 2020

GOVERNMENT SHOULD BE MORE CONCERNED ABOUT CITIZENS UNABLE TO AFFORD THE RISING COST OF ELECTRICITY

The Southern African Faith Communities’ Environment Institute (Safcei) says it is concerned that the situation in the country is reaching a boiling point, with the ongoing impact of Covid-19 on society and the economy, and now the threat of a huge hike in electricity. The SA government is expecting far too much from its citizens, who now face a potential increase of up to 15% more for electricity (likely to be implemented on 1 April 2020) – after Eskom won its court case against the National Energy Regulator (Nersa) – while simultaneously having to contend with increased lockdown regulations and a fresh bout of load shedding.

Safcei’s Francesca de Gasparis says, “We welcomed the announcement of the Basic Income Grant, however the government must do more to cushion citizens, especially in poorer communities, from the country’s ongoing energy crisis, on top of the economic and social impacts of this pandemic. We are in the heart of winter, with Covid-19 infections spiking, yet an increasing number of South Africans are unable to afford the essential and basic service of electricity. The reality is, as time goes on, due to lack of work and economic pressures, more and more households will need affordable essential services from their local authorities.”

Safcei contends that Nersa does not have the power to protect citizens from Eskom’s legacy of mismanagement and poor maintenance planning, which, along with over-staffing and continued expensive generation choices (such as coal and nuclear) are largely responsible for its inefficient electricity supply, current load shedding and rising costs.

It is Nersa’s role to regulate energy supply and costs, to challenge Eskom on the pricing of its supply and, at the same time, ensure that the tariffs are affordable to energy users. Electricity can only be an enabling service – which helps provide people with security, communication, health, education and entrepreneurship opportunities – if it is affordable.

“Contrary to an expected focus of support for citizens in need, during the pandemic, two disturbing events are playing out in our electricity sector. Firstly, the Department of Mineral Resources’ (DMRE) is exploring, once again, whether to bring more expensive nuclear energy back to the table, with funds being allocated to investigate small modular reactors. And secondly, the government is investing in nuclear, while funds of R1.5bn, allocated for basic electrification for homes that have no electricity, have been suspended from the Energy budget. We have to ask, are energy decision makers genuinely interested in the needs of all citizens and the future of our economy, when viewing this disparity in financial decision making?” says de Gasparis.

According to Safcei’s Energy Consultant Kim Kruyshaar, local authorities, who are at the coal face of providing reliable services to their citizens, rely on affordable bulk purchases from Eskom. This enables them to earn a profit that is then used to subsidise electricity for households that cannot pay the full cost of supply.

“The Free Basic Electricity (FBE) grant from Treasury, which provides some relief, is not nearly enough for the households who qualify nor for the local authorities providing a subsidised electricity service. Service provision is likely to be affected, with Covid-19 resulting in reduced economic activity and an increase in debt default. Meanwhile, the number of households that qualify for reduced rates and free services is increasing,” says Kruyshaar.

If Nersa is forced to pass on additional Eskom increases, local authorities will continue to be stuck. They will have to, somehow, balance Eskom’s high tariffs, with the difficulty of providing affordable services for their citizens. After losing the court case against ESKOM, Nersa is reviewing its way forward.

Kruyshaar says, “While a number of costs in Eskom’s Regulatory Clearing Account (RCA) application were disallowed, the High Court overruled Nersa. It is disconcerting that the court did not, or was not, in a position to rule that the RCA process, which many concerned parties – community representatives, commercial, agricultural and union bodies – have objected to, over the years, as no longer fit for purpose. This is the process, coordinated by Nersa, which allows Eskom to apply to make up its shortfall in revenue, between its projected and its actual income, from a previous financial year.

ENDS

Issued by Maria Welcome, on behalf of Safcei. For any media queries, please contact Maria on Maria.welcome.comms@gmail.com or 082-936-9199 or contact Natasha on Natasha.adonis.comms@gmail.com or 079-799-9654.

Note to Editor:

• Local authorities do not make a profit from selling water or electricity. They charge certain customers more, using the profit to cross-subsidise the free services (it provides) to citizens who are not in a position to pay. E.g. One-third of Cape Town citizens get free water and almost 50% get subsidized electricity.