Tag: Nersa

Business Unity South Africa (BUSA) notes with concern the National Energy Regulator of South Africa’s (NERSA’s) decision to grant Eskom above-inflation electricity tariff hikes against the backdrop of an economy that is underperforming.

 

BUSA cautions that the cumulative tariff over the next three years may undermine economic recovery efforts, as electricity is a major input cost for business. The organisation had warned during the NERSA conducted public hearings into Eskom’s multi-year price determination 4 application, that the economy would not be able to absorb above-inflation electricity increases.

 

The unintended consequences of today’s decision may result in a further decline in Eskom’s customer base, as users seek more reliable and cost-effective alternatives, exacerbating the depth spiral. BUSA had also cautioned against the cost of organisational inefficacies at Eskom being passed on to end-users and consumers.

 

“BUSA has consistently emphasised the need for any tariff adjustments to be considered on the basis of affordability, justifiability and prudence. It also needs to be assessed against any restructuring of Eskom to ensure a fit-for-purpose electricity supply industry,” said BUSA Vice-President Martin Kingston.

 

BUSA welcomes the further investigations that NERSA has undertaken to perform into prudency, efficiency and performance, as well as the Regulatory Asset Base.

Business Unity South Africa (BUSA) agrees with the emphasis on economic growth, the pressing need to create jobs and prioritising skills and education, as outlined in President Cyril Ramaphosa’s State of the Nation Address (SONA).

 

“We also appreciate the President’s establishment of a commission on the 4^th Industrial Revolution,” said BUSA President Sipho M Pityana.

 

BUSA particularly commends the President’s commitment to deal with corruption, as well as the revelations coming out of the Zondo Commission of Inquiry. In this regard, the new law enforcement unit will, in time, go a long way in combatting corruption and put an end to looting.

 

BUSA concurs on the urgent need to implement an effective turnaround strategy at Eskom.  The organisation also welcomes the general thrust of policies mapped out both in terms of social and macro-economic initiatives, which come in tandem with programmes of work designed to give effect to the SONA. The speech is unequivocal in sketching South Africa’s national priorities and unambiguous about its policy direction, as well as setting the country on the course to become a dynamic future-oriented economy.

 

It is BUSA’s considered view that the economy is the foundation stone of creating a just and equitable society. Creating a conducive investment environment by lowering the regulatory burden and ensuring policy certainty is key to increasing South Africa’s chances of reaching its investment goals and making sure that business plays its part as a social partner.

 

Furthermore, a fit-for-purpose education and skills system, ensuring that South Africa is ready for the realities of the Future of Work, addressing poverty and inequality, dealing decisively with state capture and corruption, and ensuring that the state has adequate capacity are all fundamental pillars that will help support an optimal operating environment.

 

Although Eskom is the most pressing case among state-owned entities (SOEs), this is also the opportune moment to take decisive action on parastatals to ease pressure on state finances. At its recently concluded Business Economic Indaba, BUSA expressed a willingness to work with Government to play a constructive role in addressing the challenges faced by the country’s SOEs. Business remains ready to play its part and to be at the fore of initiatives aimed at getting the South African economy growing again.

 

BUSA emphasises that meaningful and aligned action, as well as implementation, are now needed to give tangible expression to and reinforce the national vision articulated in the SONA. It will also be crucial to hold Cabinet to account on ineffectual delivery.

 

“The announcements pertaining to the signing of the Competition Act Amendment Bill, the National Health Insurance, changes to the National Prosecuting Authority Act and land policy are noted. Of significance is accelerating the release of high-speed spectrum, which will aid efforts to ready South Africa for the 4^th Industrial Revolution, as well as the President’s emphasis on creating a conducive environment in which business, inclusive of small business, can participate in the economy,” said Pityana.

 

The organisation also notes plans to develop the oceans economy and to further liberalise the visa system to attract more tourists. BUSA welcomes the emphasis on collaboration and the call for business to work with other social partners – Government, Labour and Community – to give effect to the vision outlined in the SONA.

 

Business Unity South Africa (BUSA) today welcomed the announcement by the National Energy Regulator of South Africa (NERSA) of a 5.23% inflationary linked electricity tariff hike. In deciding on the tariff, NERSA rejected the application by Eskom for a 19.9% tariff hike, electing instead to prioritise the public interest and consider the impact of the tariff in light of prevailing social and economic conditions.

BUSA acknowledged the role of NERSA, which had conducted a comprehensive public consultation process, that included consultation within Nedlac. NERSA received and considered 23 000 submissions during the course of the public consultations. BUSA stated that the unprecedented number of submissions from the public underscored the importance of Eskom to South Africa.

“NERSA is to be acknowledged for the comprehensive manner in which it consulted stakeholders and considered the ramifications of the tariff on the most poor, as well as on businesses large and small that are facing extreme headwinds in the current economic climate” said BUSA CEO, Tanya Cohen.

“The decision announced by NERSA will enable businesses to start the new year with certainty in respect of the most significant input costs”, stated Cohen

BUSA stated that it is imperative to engage in detail on how to ensure the sustainability of Eskom in the longer term – not only as the country’s dominant supplier of energy, but also due to the influential size of the Eskom debt relative to the national budget. In this regard BUSA reaffirmed its commitment to working with Government and Eskom to ensure the long term sustainability of Eskom.

Speaking during the first week of the National Energy Regulator of South Africa’s (NERSA) public hearings on Eskom’s revenue application for 2017/18, BUSA CEO Tanya Cohen said any above inflation tariff increase without considering the impact on the economy and decisively addressing the appropriateness of the Eskom business model is not justifiable nor sustainable.

“The proposed tariff increase is not acceptable on a number of grounds including the immediate impact thereof on the economy and consumers and the longer-term impact on the financial stability of Eskom. The application that is currently on the table is untenable. It does not include any proposals as to how the pressure on the fiscus and on the individual consumer could be mitigated,” Cohen said.

BUSA stated that the proposed tariff will have a severe impact on inflation, the economy and employment and is simply not justifiable in the current climate.

BUSA stated that the huge cost of overruns with the Medupi and Kusile mega projects combined with the allegations of extensive corruption at Eskom, that had yet to be comprehensively investigated, cast significant doubt on the ability of Eskom to manage its revenue wisely.  BUSA believes that NERSA has the responsibility to ensure that any licensee operates in a manner that is free from corruption and in line with sound principles of good governance. A credible board and good governance needs to be restored to Eskom as a precondition for any tariff increase.

On the basis of a comprehensive analysis of the application, BUSA believes that increase should not be more than CPI, and only on the basis that appropriate conditions are formulated to ensure that serious attention is given to addressing poor governance and corruption within the entity.

In respect of the longer-term sustainability of Eskom, BUSA urges NERSA and Eskom to accept that the financial risk that Eskom poses to the fiscus requires urgent intervention and should be addressed prior to any future application for tariff increases being considered.

BUSA has repeatedly called for tariff applications of a duration of longer than a year that can provide greater certainty to the public and the economy. BUSA emphasised the need for Eskom to justify all assumptions in the tariff application on a consistent basis.  It stated that any tariff proposals should be made within the framework of a relevant Integrated Energy Plan and Integrated Resource Plan for the country. BUSA stated that was highly concerning that consultation on these plans had not yet commenced, given their importance to the country.

Business Unity South Africa (BUSA) welcomes National Electricity Regulator of South Africa (NERSA’s) decision to decline Eskom’s condonation application which, if granted, would have seen the power utility raise electricity tariffs without providing the necessary motivation. “BUSA opposed Eskom’s application to raise electricity tariffs without justification from the onset. We are of the view that the application was not in line with good governance and accountability.” BUSA CEO Tanya Cohen said.

In its submission, BUSA stated that it believed NERSA’s decision needed to be in line with its duty to balance the interests of all stakeholders. Electricity price increases should be considered and determined with full disclosure of relevant information by Eskom in accordance with established procedures on a consistent, transparent and comprehensive basis.