NERSA doesn’t represent the interests of South Africans

By Gugulethu Hughes

Editor’s note: The opinions expressed here are those of the authors. View more opinion on ScoonTV.

The National Energy Regulator of South Africa (NERSA) was established in 2004 with a mandate to regulate electricity, piped gas, and petroleum. A closer examination of NERSA’s decision-making in recent years provides enough evidence of a regulatory authority engaged in advancing the neoliberal agenda of recalibrated apartheid capitalism. The bulk of decisions made by NERSA in industries it oversees perpetuates the suffering of black people who make more than 80% of the population.

At a time when South Africans are grappling with tough economic times, exacerbated by Eskom’s rolling power blackouts, NERSA has decided to grant the energy provider a tariff increase of 18.65% effective April 1st, 2023. Another increase of 12.74% is said to come in 2024-2025. In granting the increase, NERSA argues it sought to balance the needs of both consumers and Eskom. But the truth is that NERSA, just like Eskom, is divorced from the needs of all South Africans who yearn for freedom, liberation, prosperity, and security.

There is absolutely zero justification for NERSA to grant a tariff hike application for an institution that is failing in its mandate to meet the country’s energy needs. It is treasonous that NERSA totally ignores Eskom’s failure in safeguarding national security. Energy provision is pivotal for all facets of national security. In granting Eskom its request, NERSA is aiding in the imperialist project of deadening South Africa to justify the privatization of energy provision and national security.

It’s one thing to grant a tariff increase to Eskom but another to grant an increase to an Eskom that scores zero points in the social, political, and economic scorecard. A majority of South Africans are now in a position where they no longer have access to electricity. When they do, they can no longer afford the cost of purchasing it. 

In justifying the tariff increase granted to Eskom, regulator member Nhlanhla Gumede on SABC argued that NERSA was forced by the courts to use a methodology that it is bound to in determining the tariff increase. He further states that Eskom sought the increase so it can purchase more diesel to reduce the burden of power blackout and the consumer needs to pay for both the diesel and the idle coal power plants.

What is even more shocking with this methodology is that even after the tariff increase granted to Eskom, it does not mandate the power utility to then provide electricity efficiently. What this means is that Eskom is going ahead with both the hike and full steam on blackouts with no consequences.

The Multi-Year Price Determination Methodology “forms the basis of which NERSA evaluates the price adjustment applications received from Eskom.” Out of the six objectives adopted in the MYPD methodology’s development, two stand out for exposing the capture of NERSA by commercial interests.

The first one is that MYPD must ensure Eskom’s sustainability as a business and limit the risk of excess and inadequate returns. The second one is that the MYPD must ensure reasonable tariff stability and smoothed changes over time consistent with socio-economic objectives of the government. A behavioral analysis of the ANC regime led by Cyril Ramaphosa points to a government that is bullish in ensuring Eskom’s sustainability as a business and in maintaining the inequality gap between the rich and the poor.

NERSA’s MYPD document clearly states that “the development of the methodology does not preclude the Energy Regulator from applying reasonable judgement on Eskom’s revenue after due consideration of what may be in the best interest of the overall South African economy and the public…”

Instead of taking Nhlanhla Gumede to task on this, the interviewer instead showed sympathy with the regulator that has made itself a victim of its interpretation of its own methodology. This once again exposes the poverty of substance in our media and the courts – in a normal environment these institutions have a moral duty to exhibit an understanding of the social contract. 

The methodology that NERSA is hiding behind also makes provisions for the regulator to apply rationality, but that is all ignored so commercial interests prevail. Eskom may be a state-owned company, but its supply chain is private. The Eskom tariff increase will ensure the commercial sustainability of multinationals in the Eskom coal and diesel supply chain. The other option is going to be used to maintain the lifestyles of Eskom executives and incentivize them to continue making the power utility redundant and obsolete.

All these stakeholders with private interests do not experience the economic challenges faced by majority South Africans. NERSA is part of a broader church tasked with the goal of making electricity unavailable and unaffordable. They do this as a means of justifying the privatization of Eskom through decommissioning of coal power plants in South Africa and export of coal to Europe to bridge the gap left after Russia sanctions.

This church includes USA and western countries financing the South Africa Climate Finance Deal set to keep the country debt-trapped for life. Other church members include the ANC NEC and political parties like the Democratic Alliance and individual billionaires like George Soros and Jeff Bezos.

NERSA consists of nine regulator members who make all these ludicrous decisions on behalf of capital. One of the members is Nhlanhla Gumede who serves as head of the electricity regulation division. Previously, he was state oil company PetroSA’s chairman of the board and was accused of meddling in the operations of the entity. This led to the resignations of the then chief executive officer, chief financial officer, and chief risk and compliance officer in 2018.

Gumede also worked for advisory firms in the gas and energy sector. In 2018, he was appointed to the NERSA regulator board by Energy and Mineral Resources Minister Gwede Mantashe, himself a decorated apparatchik and embodiment of everything that is wrong with South Africa.

Then there’s Thembani Bukula, NERSA chairman and a former CEO of PowerX, South Africa’s first privately licensed electricity trader. Since 2018, PowerX has secured even more licenses from NERSA. Fungai Sibanda is one of the nine regulator members and is also executive director of Hekima Advisory which lists steel producer ArcelorMittal as a client. ArcelorMittal is a beneficiary of the NERSA-granted Eskom negotiated pricing agreement. 

Recent NERSA regulator decisions approved Eskom’s negotiated pricing agreement applications with big companies such as ArcelorMittal, Sublime Technologies, and Hillside Aluminum, among others. In the case of Hillside Aluminum, Eskom implemented a negotiated pricing agreement without approval from NERSA and only sought it in retrospect. Unsurprisingly, NERSA eventually granted the application.

This shows that NERSA is able to bend its methodologies for corporations but will invoke the law when justifying decisions which affect the lives of South Africans. Other beneficiaries of NERSA include solar and wind energy company Independent Power Producers, owned mostly by Europeans, and others where clever blacks are at the front. Karpowership SA, owned by a Turkish company and local consortium consisting of four companies, is also a beneficiary of NERSA neoliberal benevolence. 

The inverter and gas appliance industry is now booming, and the purchasing costs are increasingly becoming exclusive. This will create another alternative energy bourgeoisie class. While those who afford to pivot to other solutions outside of Eskom imagine that they are now off the grid, it remains a fact that Eskom’s failure to provide electricity will negatively affect their disposable income.

For small businesses, even those currently managing to use diesel engines, the ever-rising cost of fuel almost guarantees business closure. Unlike big businesses, Eskom and NERSA are not interested in providing small businesses with negotiated pricing agreements. Cyril Ramaphosa is right in saying that his hands are tied, he is just an employee of European settler monopoly capital.

The truth is that South Africa is in the hands of colonial and neoliberal mafia. Granting a tariff increase that is higher than the inflation rate, coupled with the nine other stooges overseeing monetary policy at the Reserve Bank, means that South Africans will find it increasingly harder to keep the lights on. National security risk posed by privatization of energy provision will affect all of us regardless of your on-grid and off-grid statuses.