Eskom- the elephant in the room…

For weeks now Parliament has been listening to a litany of warnings from Brian Dames, CEO of Eskom, and Paul O’Flaherty, financial eskom logodirector, on the necessity to maintain a rock solid balance sheet to the outside world, particularly the banking and loan sector, in order to secure and maintain loans by Eskom subject to favourable considerations by the rating agencies.

This is important, they say, in order to ensure electricity rates at a revised figure, carved down from what was originally asked for to a much lesser 16% increase per year for five years and which is now proposed to the national energy regulator (NERSA), supported by the department of energy (DOE).

The whole application is termed the third of the multi-year price determinations known as (MYPD(3), given the love of acronyms in the energy world but not so loved it seems during the hearings being conducted by NERSA around the country.

In fact, the deep distrust of Eskom and the possibility that they are not working in the national interest of the consumer but rather their own has become almost a theme of those taking the podium to express their displeasure at constantly increasing electricity prices.

It all goes back to a simple question asked by an MP in Parliament during the explanation given by Eskom to the energy portfolio committee on the reasons for their MYPD(3) application.   “Why”, asked the MP,  “did Eskom on the one hand try and run its business like a commercial giant when in fact it is a state utility providing a service to the consumer and presumably not trying to make a profit at the expense of the consumer?”

The retort from Eskom was that any failure to get loans without a strong balance sheet would result in even higher electricity rates. But is this really true many have asked during the current NERSA hearings.  Is it a question of credit agency ratings or the need to show profits that is driving the Eskom bid for 16% increase at least per year?

Energy Intensive Users Group who are responsible for 44% of electricity consumption say that in their calculations, Eskom needs only 10% at most.

In Cape Town, National Union of Miners said succinctly, “Consumers should not be punished for policies of the past and NUM questioned whether a “R46bn shareholder return was justifiable for a state company.”

In reality, there is no doubt that Eskom does not consider itself a state utility, or at least it certainly does not act like one. A reading of their website quickly clears up any doubt on that issue, the language of the site painting a solid picture of competence and financial strength to the world in general.

In fact the financial problem for the country is what can the foundries that are going insolvent, the struggling businesses facing imponderables and the ordinary citizen facing unheard of monthly municipal accounts, do about an organisation determined to make the kind of profits that give good sleep to bank managers only.

Quite clearly, this scenario will have to be played out before Budget day.

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NA smallWith Parliament now open, parliamentarians already at work in some of the committees and training in progress for the new MPs, the State of Nation Address is now scheduled for 14 February, followed by a week of debate, the President’s response being on the 21 February and the Budget set for 27 February.

Parliament of South Africa 20.12.2012

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