Tuesday, April 29, 2008

Submission to NERSA on Eskom price hikes

NERSA's requests for comments are in blue and my responses are in grey type.

Stakeholder inputs requested:

Stakeholders are requested to please comment on the following:

1. Given that Eskom states that there has been a significant increase on
primary energy costs from the time of planning to now, please comment
on coal price escalation and methods of restricting the price escalation.
What contribution should primary energy suppliers, especially coal mines,
offer in order to achieve efficiency in the supply chain?

Eskom should sign long term contracts with coal miners and stop using the spot market to obtain coal supplies.

2. The Eskom application includes demand side management (DSM) cost of
R2.5bn that must be recovered from customers other than recovering this
cost from the customers, what other funding options for DSM can be

If Eskom’s tariff structure was determined by levels of consumption then the resulting increased prices with increased consumption would naturally give rise to reduced demand.

Apparently 10% of national electricity consumption arises from the theft of electricity. Thieves of electricity have no incentive to reduce their consumption. Eskom should invest in ways and means to minimise electricity theft.

3. The 53% real increase required by ESKOM will result in a R12.7 billion
profit after tax, please comment on the necessity and adequacy of the
above profit after tax.

See my comment under point 6.

4. Government has granted Eskom R60 billion loan to assist in the capital
expansion program, in view of the current electricity emergency what other
forms of assistance should the Government provide or consider?

See my comment under point 6.

5. What commitments should be required from Eskom during the
consideration of the application and after the conclusion of the

No comment.

6. Any other comments that the stakeholders might propose to the Energy

My general comment is that I accept that the generation and supply of electricity to consumers demands expenditure from the electricity supplier. Thus the supplier is entitled to recover these costs and to make a reasonable profit for investments in the future viability of its generating capacity through what it charges customers for the supply of electricity.

However in the interests of all of us this matter needs to be considered in a holistic manner.

The reality is that the use of non-renewable fuels [coal, gas and nuclear] as the primary energy source for electricity generation is simply not possible in the long term because these resources will come to an end.

Also in the light of world wide climate change, being exacerbated by CO2 and other GH gas emissions from fossil fuel powered electric power stations, international pressure on countries emitting excessive amounts of GHG’s is going to increase considerably over the coming years. That is not to ignore the real detrimental damage resulting from climate change that will be taking place all over Southern Africa.

Thus I would be quite happy to accept increases in the electricity tariff if Eskom was clearly and transparently using the extra money to shift the its energy sources, for electricity generation, to renewable ones such as solar, waves, tides, winds and geothermal.

Right now with Eskom’s current plans for increased numbers of fossil fuel and nuclear fuel fired power stations I see myself and other consumers being squeezed to help fund the long term destruction of ourselves and, if not of ourselves, of future generations.

This simply does not make any sense to me when we as a country have available to us an abundance of renewable energy resources, such as listed above, and the technology for utilising solar energy for electricity generation, for example, is already in use in other countries. Not only that, other countries, not so well endowed with sun light as we are, are busy developing the technologies to utilise waves and tides. We should be too.

Yes we are facing a power generation crisis but Eskom’s proposed solutions whilst purporting to relieve the crisis in the short term will seriously exacerbate it in the longer term.

Thursday, April 17, 2008

Financial Stability not Profligacy

[Not having] a savings culture, we were tempted into large external imbalances. Although comfortably funded [by outside investment inflows], we became alarmingly concerned about the implied risks, remembering our own 2001. What if the world lost interest in us, turning on us because of our profligate ways and indiscipline?

What price would we pay if capital were to be suddenly withheld, the Rand going into cardiac arrest but instead of inflation exploding (as in 1985, 2002) and abruptly higher interest rates calling us to account? It in fact happened again to Iceland this year.

Such anxieties have already these past two years induced us to make domestic changes, reining back consumption through higher interest rates, fiscal surplus and new national credit act. But instead of an external 'sudden stop' ambushing us, abruptly withholding access to foreign capital, which didn't happen, the global windfalls did carry yet another form of toxicity.

Higher commodity prices became carriers of a virulent inflation virus. The consequences are most unpleasant.

Our CPIX inflation has exploded from 3.5% to 9.5%, with a peak nearer 12.5% imminent. Two-thirds of this rise can be blamed on global oil and food prices. Also, on the weaker Rand (its weakness partly reflecting global risk aversion as banking crises hit, and our own uncontrolled appetites through trade and savings shortfalls).
The other one-third inflation rise is an own goal, mainly electricity linked. Only minimally so far have our labour and businesses sinned.

But such sinning may become problematic. We try defending ourselves against the impoverishment implied by the windfall toxicity, having to pay steeply more for oil, food, imports and electricity, outpacing our current price and salary structures. Thus we stand ready to raise our inflation expectations and wage and price demands.

This compels the SARB to raise interest rates yet again, trying to contain such urges. We should accept that windfall toxicity impoverishes us and that we should adjust our spending and saving, importing and exporting, rather than making greater inflation demands in a forlorn attempt to square the circle.

Wage-price spirals don't solve anything. Indeed they only make things worse. Thus more rather than less discipline.

This quote comes from Cees Bruggemans’ email newsletter; he is Chief Economist at First National Bank. In his most recent letter he puts forward the dangers inherent in high commodity prices for us South Africans because of our particular national weaknesses i.e. high spending and no saving. In other words ‘eat drink and be merry’ but we leave out the ‘and tomorrow we die’ bit because we do not want to die, who does? So when the financial crunch comes in higher interest rates etc we start agitating for higher wages and other inflationary actions without stopping to look at our contribution to the problem.

National financial discipline, rather than financial profligacy, is a cornerstone of a successful society and we all want South Africa to be a successful society. Such discipline must start with the individual and spread out from there to embrace all of society. It must also be evident in the life styles of the leading people in society who set the example for the rest of us. Unfortunately this is far from the case in the South Africa of today where profligate consumption by the cream of society is the order of the day.

Friday, April 4, 2008

Residential Sustainable Communities

I am a retired 68 year old living in Kensington Johannesburg, divorced but with a partner who lectures at the University of Limpopo and visits me when she can.

I was intending to move into a retirement facility in about my mid 70s and on enquiring about availability of accommodation therein I found that in a retirement facility near me there was a twenty year long waiting list for cottages. Their shortest waiting list, first floor one bedroom flats, was three years long. It would seem long waiting lists for retirement facilities are currently the norm. One of the reasons for this of course is that people are living between 10 to 15 years longer than they used to forty or more years ago. This set me thinking. Perhaps this situation actually provides an opportunity for a new life after retitrement. Are there retirees out there who would be interested in working together to form a residential community, I wondered. Hence this blog.

For many years I have been very concerned about the destruction that humankind is wreaking upon our natural environment. As my knowledge of the steadily increasing destruction expanded I became more and more despondent about any kind of long term future for humankind. Over the Easter weekend I spent a fair amount of time surfing the web looking at environmental web sites and I became even more despondent because the bulk of the information contained in them seemed to be predicated on fixing particular issues that arose from what I saw as the real problem which is the West's total way of living which is completely unsustainable and which the rest of humankind seems hell bent on following.

Unless humankind changes to living in a completely sustainable manner our species, and many other species along with us, are doomed. Unfortunately in this matter of changing the way we live, which can be compared to trying to turn a huge ocean liner around, we, as a species, might not make the needed changes fast enough. In this case, which is a definite possibility, what is to be done?

It seems to me that those of us who are aware of this problem are in a similar position to that of Noah before the flood and like Noah it is incumbent upon us to create Arks or pockets of completely sustainable living which mght, just might, God willing, survive the looming environmental catastrophe should it befall humankind. Such Arks will of necessity be comprised of small communities and the more of them that there are the greater our species chances of survival.

This is where the idea of residential communities of retirees came in, residential communities of reirees doing what it takes to live sustainably so that they can serve as exmplars to others seeking to also adopt sustainable life styles.

As I am a long tgime spiritual practioner having been a Quaker since 1963, an Iyengar Yoga practitioner since 1985 and a Vajaryana Buddhist since 1987 my vision is of a residential community of financially independent spiritual practitioners who are also environmental activists. Anybody who is interested or wants to discuss this concept is more than welcome to contact me either by email or telephonically at 011 616 4204.