Minerals Council opposes Eskom's application for additional R27bn in revenue

Minerals Council opposes Eskom's application for additional R27bn in revenue

Cape Town - The Minerals Council of South Africa said it would appear before the National Energy Regulator of South Africa (Nersa) on Friday, to give verbal evidence in support of the organisation’s written submission opposing Eskom’s Regulatory Clearing Account (RCA) application for an additional R27.3 billion in revenue.

According to the Council, the additional revenue is intended to compensate for revenue shortfalls and cost overruns during Eskom’s 2018/19 financial year.
In his presentation, chief economist at the Minerals Council, Henk Langenhoven is expected to note that the opposition to the application, which would effectively increase already high electricity tariffs by a further 15% on average, is based essentially on two main arguments.
“Firstly, Eskom’s revenue shortfalls and cost overruns are due to mismanagement on the organisation’s part, and it seems inconceivable that the costs of this mismanagement should be passed on to household and business consumers,” Langenhoven said in a statement.
“The Minerals Council’s economic modelling suggests that the granting of Eskom’s application will result in more than 8,200 job losses at marginal mining operations. There would doubtless be equivalent impacts elsewhere in the economy. All of this could have been prevented had Eskom been run efficiently.”

The second basis for the Minerals Council’s opposition to Eskom’s RCA application is that the impact on Eskom would be the opposite of what is intended. Even if Nersa decides that consumers, including mining companies, can justifiably be asked to pay for the shortcomings in Eskom’s management decisions, demand will be reduced and with it, Eskom’s income, the Council said.

Tariff increases of more than 523% since 2008 are largely responsible for the decline in electricity sales volumes. In 2008 actual electricity sales recorded were 224,366 GWh and in 2019 it had declined to 185,930 GWh. Should the historical tariff increases be extended through the granting of this application, this trend of reduced demand will continue, cutting Eskom’s revenues even further. That may prompt Eskom to ask for a new RCA next year, when this comes to fruition. This would be truly a ‘death spiral’, according to the Council.

African News Agency (ANA)

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