Daylight robbery: Eskom, where does all the money go?

The average four-person South African household should pay R290 a month for electricity, yet Eskom is charging them roughly R1,200, says a lobby group.

Now Eskom is seeking a 20% tariff increase from the National Energy Regulator of South Africa (Nersa).

Energy analysts have described Nersa, which starts its public hearings into the proposed tariff increase in Pretoria today, as the only thing preventing disaster.

Presentations by the Organisation Undoing Tax Abuse to parliament's public enterprises portfolio committee this week reveal the power utility should be relying on its capital expenditure budget and the government and not on ordinary South Africans to float it.

Finance Minister Malusi Gigaba this month said the government was considering granting Eskom a favourable loan or possible bailout.

StatsSA yesterday released its findings of Capital Expenditure by the Public Sector 2016 report, which showed that capital expenditure by public sector institutions rose to R284-billion from R265-billion.

The report shows that capital expenditure by state institutions has increased by R1.2-trillion over the past five years. Eskom accounted for R73-billion, with the new Medupi, Kusile and Ingula power stations accounting for R70-billion.

Outa's energy specialist Ted Blom said they revealed to parliament Eskom had a qualified audit of R3-billion in irregular expenditure without supporting documents.

"Explanations are needed as to how the R3-billion was processed without the documentation. Either there is a magic password which allowed this or there is an old chequebook lying around. Either way Eskom's chief financial officer, Anoj Singh, must explain."

Blom described the electricity tariffs the average four-person household was paying as "daylight robbery. There are three cost drivers to the power utility. They include the financing costs of money borrowed, their power plants and the operations."

Only Eskom's operations were subject to inflation, so increases should be a third of inflation, as two-thirds of costs were fixed.

He said on the assumption Eskom was efficient in 2005, and the cost of electricity for a four-person home was R160, the cost now for electricity, based on an annual escalation of a third of CPI, would be R290.

Blom said compounding Eskom's financial problems was the building of Medupi and Kusile power stations.

Blom said Eskom recently announced that they need to borrow R325-billion over the next five years to finish off the two stations, 10 times higher than initial estimates.

He said Nersa should, and could, dramatically reduce the electricity tariff.

Nersa spokesman Charles Hlebela would only say that Eskom's application would be considered in terms of the law.

Eskom spokesman Khulu Phasiwe said they would respond to allegations in parliament and not through the media.