Moosa was addressing the National Energy regulator of South Africa's (Nersa's) public hearings into Eskom's application for a 60% tariff increase.

Lower income earners, by contrast, should be subsidised to protect them from the ‘massive' tariff increases that would certainly occur over the next decade.

"The lower income earners are not the ones who have gotten us into this challenge," he told those gathered to hear the reason behind Eskom's request for price hike.

"Their actual consumption is small and, frankly, is miniscule," Moosa stated.

He said it was the affluent, residential commercial and industrial consumers, who were using energy inefficiently, and that indirect subsidies via fiscal injection could encourage "over usage" and entrench a culture of inefficiency. In fact, he argued that it could also undercut the efficiency of the much needed power conservation effort, which would be brought about through the demand-side management programmes of Eskom and government.

“Can we justify subsidising the residents of Santon, Hyde Park and Bishopscourt? I don’t think we can,” Moosa said a speech on the first day of the public hearings in Pretoria.

He stressed that fiscal injections would have to play an important part in State-owned Eskom’s funding going forward, but said that it should not be forgotten that such support was, in effect, subsidisation.

He also appealed to the regulatory panel assembled by Nersa that the ultimate tariff, debt and shareholder mix should be based on long-term sustainability, noting that fiscal injections, while politically acceptable in the context of a “balanced budget”, were subject to the vagaries of economic performance. They were, thus, inherently short-term remedies, which should not be used as a basis for long-term financial stability of the electricity-supply industry and Eskom.

“The people that need to be subsidised are the lower income earners, they need to be buffered from the tariff increases that will come in the foreseeable future, whatever form they come in over the next decade, there will be massive tariff increases,” stated Moosa.

Eskom had applied to Nersa for a 60% increase in electricity prices, after being granted a 14,2% hike in December last year, which had been implemented for industrial customers as from April 1 and would be rolled out to municipal consumers as from July.

Since then, the power producer had been hit by surging primary energy costs, mainly because of coal’s increasing prices.

Nersa will announce its decision on June 4.
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