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Eskom’s Payment Plan Will Only Worsen Its Problems

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The agricultural sector has warned Eskom several times that its plans will result in it losing the agricultural sector as a customer.

The latest plan to impose drastic charges on fixed costs is no exception. Currently the average bill is 30% fixed costs and 70% linked to actual power use. ESKOM now wants to submit an application to NERSA which reverses the ratio to a 70% fixed cost component. “Farmers are already paying huge costs when it comes to fixed costs, this while the supply of electricity has often been in the news for the wrong reasons in the last few years.” says Francois Wilken, president of Free State Agriculture (FSA). Things have gone smoother in the last 70 plus days as the availability of electricity has improved substantially and load shedding has not occurred at all.

Pleasing as it is, the reason for this may need to be looked into. There are those who believe that this phenomenon has to do with the election and is simply an election gimmick, while others believe that the large number of users who have meanwhile turned to alternative power supply such as solar power, has reduced the demand for electricity. Be that as it may, and if the demand for electricity is waning, the reality is that Eskom is losing paying customers and hence the drive to adjust these costs so enormously. Something the institution was warned against.

Wilken further mentions that farmers already have enormous expenses in terms of input costs; they help fix roads, and the like. “These are all expenses for which they are not compensated and yet they still put food on the country’s tables. The latest attempt to squeeze more money out of consumers is nothing but blatant eye candy. This is not going to help the struggling institution out of the financial predicament it finds itself in despite a recent government bailout.” Wilken further believes that it is ironic that a supplier of a product discourages its customers to use the product and thus avoid a counter-reaction (overload), almost unheard of and probably the only supplier in the world that follows this business strategy. The strategy has now caused repercussions and so the paying customers have to pay for it again. The end of this trajectory is bad.

The prices of alternative energy have now become cheaper than ESKOM and users are purchasing alternatives. Having ESKOM as a backup facilitated the phasing in and financing, but now with drastic price increases on fixed costs and perhaps even carbon taxes, power consumers will be forced to go completely off the grid and that market will be totally lost to ESKOM.

Not everyone can afford it, because the cost of battery storage capacities means that power users who need power during the night or during load shedding are still dependent on ESKOM power. Extensive livestock farms already pay proportionally more in fixed costs than their actual power costs. Agricultural processing and value addition plants have cold rooms to keep fresh produce and meat fresh, and heating systems for intensive production and climate controlled system farms need a reliable and affordable source of power to provide healthy food to the consumer. As soon as ESKOM’s application to NERSA is opened for public input, Free State Agriculture will oppose it. “The large cost implications that this will have on especially smaller and intensive farms and processing plants who are direct customers of ESKOM will have to be prevented.”