This comment on Eskom’s Revenue Clearing Account application is submitted on behalf of the people of South Africa.
The problem facing NERSA, Eskom and the judge is that there is no way of determining, by calculation, a single just and equitable price for electricity applicable throughout South Africa. In making such price calculations, a great deal is generally made of a move toward “cost-reflective” prices. Such an approach provides an incentive to increase costs. Eskom adds to costs by valuing its assets at replacement value and charging depreciation on the higher value and claiming a “return” on the value added to the company’s assets. The notion of cost-reflective prices can only apply to administered prices and never a price that is the result of open competition for the business of consumers. There is no such thing as the calculation of a “valid” or “correct” price of a product or service provided by an entity that operates as a monopoly protected by law from having to compete against alternative providers. The attempt to arrive at a “correct price” under circumstances of a rigid government-owned monopoly is an exercise in futility.
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Comments on Submission on Eskom's Revenue Clearing Account Application, 2020