Umkhonto weSizwe Party’s (MK) Brian Molefe has delivered his first speech in Parliament, questioning how Eskom had requested an R8 billion clawback from a revenue determination that the National Energy Regulator of South Africa (Nersa) had previously approved.
Molefe made the speech during a plenary sitting on Eskom and the electricity crisis.
He noted that what members are considering whether a prediction error of R8 billion is acceptable or not, asserting it was “not a trivial matter and it cannot qualify to be called an error”.
“It is a fundamental error in estimation and points to a fundamental flaw in the revenue estimation model of Nersa,” he explained.
“More importantly it points to the fundamental flaw in the operating model of Eskom,” said Molefe.
The former Eskom CEO said it was well known that coal was Eskom’s biggest expenditure item.
“About 85% of energy comes from coal, by the amount of energy that is produced however by value, in rand terms coal is about 90% in Nersa’s revenue determination model so if you tamper with any of the other things you are not doing anything and you have to go to the source, being coal.”
Molefe said that this means that the price at which Eskom purchases coal has a direct bearing on Eskom’s cost and therefore the price of electricity that the consumer pays.
He said Eskom should negotiate the price it paid on coal as a big customer.
Eskom should be a price maker
“Eskom, as a large consumer of coal with numerous suppliers can negotiate in its favour the price at which it purchases coal,” he added.
“Eskom should not be a price taker in the coal industry but rather it should be a price maker. In reality, the opposite is true as Eskom officials rarely stand up to the bullying by rich mining companies who do not hesitate to use political and other methods of pressure to force exorbitant prices down the throat of Eskom officials,” he emphasised.
“The outcome of this is that the resultant high price of electricity is in fact a transfer via Eskom and Nersa of money from the clients of Eskom especially the poor to the rich coal mining companies that feed their insatiable appetite for profit.”
“To put it crudely, Eskom and Nersa are just conduits that extract money from poor South African citizens, who are surviving with minimum starvation wages to give to the rich called mining companies.”
The R8 billion approved by Nersa is in simple terms is money that Nersa, as a conduit, will be taking from the poor working-class South Africans to give to the super-rich coal mining companies to feed their thirst for profit, he said.
Molefe argued that it is the price of coal that should be regulated and not the price of electricity.
He maintained that government issues the licenses to mine coal and then buys it from the licensed mines through its 100% ownership of Eskom.
Government will take its time to recoup the R8 billion
Minister of Electricity and Energy Kgosientso Ramokgopa also spoke during the plenary session and said that the rising cost of energy and its profound impact on inflation and the cost of living and the escalation in energy prices touches every facet of society.
He said that leaders need to understand the far-reaching consequences of the energy crisis on South Africans and their livelihoods.
Ramokgopa South Africa is grappling with the higher prices of essential goods and services driven by inflation and economic instability and fixing our energy infrastructure and ensuring reliable power will require significant financial resources.
“One of the most critical challenges we face is balancing the need to stabilise our energy sector with a responsibility to protect citizens from economic hardship, particularly the poor and marginalise communities.”
Ramokgopa said South Africa needs solutions that balance the pressure of the cost of living and the unavoidable cost of investments required to end the energy crisis.
“The recent resolution by the National energy regulator to allow Eskom to recover R8 billion from the 2021-2022 financial year highlights this challenge we face in balancing Eskom’s financial sustainability and economic well-being”.
He wanted to make it clear that Nersa is not obliged to ensure that Eskom recovers this R8 billion in any particular window.
“One of the proposals that I’m making to ensure that we ease the pressure on every South African is to ensure that this R8 billion is outside the current window of application. Also, the law does not suggest that it should be recovered right away. It can be recovered over a period of time,” he added.
IOL Business