National energy regulator Nersa should grant power utility Eskom “nothing” until costs have been prudently and efficiently determined.

In fact, there’s a school thought that believes Nersa should rather tell the Department of Energy (DoE) and Eskom to adopt international best practice: to establish independent distribution and generation grids; introduce competing power generation; sell off power stations; deregulate to increase competition; allow private sales back to the grid; sell assets to pay off debt; and create a competitive energy market.

This will achieve the energy security that South Africa needs, according to FMF board member Terry Markman, in a hard-hitting submission to Eskom’s MYPD 3 – 2014-15 to 2016-17 application on 14 May.

None of this is new, he adds – it is existing government policy and included in the 1998 White Paper, the ISMO Bill and the NDP.

“The R67-billion Regulatory Clearing Account (RCA) claim Eskom wants is outrageous and a direct result of gross inefficiency; poor management; maladministration; corruption; high wages; overspend at Medupi and Kusile and more. They should get nothing because any grant at all is a reward for incompetence and inefficiency. We should send Eskom the strong message that consumers have had enough.”

Eskom must do what private companies in financial trouble do: reclaim stolen money; claim against any illegal contracts; become efficient; reduce their wage bill and sell off assets, he says. They cannot keep coming back with a public funds begging bowl.

“Nersa should tell the DoE, the Treasury and the Department of Public Enterprises to address the basics and undertake a fundamental review of the Eskom business model,” Markman says. “We need a strong, independent and objective organisation to tell the government what is the solution. Nersa could do this as they have the knowledge and understand the policy. Eskom cannot do this – they are operators not policy makers.”

According to Markman, energy security in South Africa requires the following fundamentals:

* Independent transmission and distribution grids;

* Competing power generation;

* Deregulation to increase competition;

* Sale of assets to pay off debt; and

* Create an energy market.

Examples of the positive effects of a competitive energy market exist globally, he says. The European Union (27 countries) introduced competition (access to grids) and prices fell by up to 20%. When the UK broke up the electricity monopoly, prices took 20 years to double.