Pay up or go dark, acting Eskom CEO warns | Fin24

Pay up or go dark, acting Eskom CEO warns

Jun 28 2015 16:00
Yolandi Groenewald

Johannesburg - South Africans are caught between a rock and a hard place. Do they opt for more expensive electricity or less electricity?

And if South Africa were to grant Eskom more money, are there any guarantees our state utility will miraculously be able to do its job properly?

These were among the questions South Africans were left with at this week’s public hearings into the utility’s request for a 24.78% hike of its main domestic tariff.

Acting Eskom CEO Brian Molefe was not afraid to use some good old fear mongering.

“If South Africa is not prepared to cough up R15bn more for diesel, the cost of load shedding will be far higher than that,” he warned. 

He and Thava Govender, Eskom group executive for generation, warned South Africa more load shedding was on the cards if the increase was not granted. 

It costs about R2.35 per kilowatt-hour to generate electricity with diesel generators, as opposed to the 50c per kWh to generate power in coal-fired power stations.

Molefe said the increase was critical to fund the additional R15bn in revenue needed to avoid prolonged load shedding.

The additional money would be used to pay for diesel for some generators and buy electricity from independent power producers. 

The diesel generators will supply the additional power needed when coal-fired power stations are shut down for maintenance.

The International Monetary Fund warned this week that severe electricity shortages had become the greatest obstacle to South Africa’s growth. Yet Eskom hoped to bring a total of 3 700 MW from the 12.69% already approved. The approved increase had been set for the first of next month.

Although Eskom was aiming for the 24.78% to be granted nearly immediately, it became apparent in the hearings that any new increase could only come into effect in July next year because municipalities would not be able to pass the increase on to their consumers.

Molefe was not the least bit pleased about this.

Eskom bailout

The hearings came in the same week Parliament granted the state utility a R23bn cash injection and approved another bailout, with the conversion of a R60bn loan to equity. Eskom found itself without a single supporter at the hearings.

Energy expert Chris Yelland tore apart Eskom’s presentation, saying it was dishonest. 

“Unbudgeted Eskom diesel costs are a direct result of Eskom’s own failings. Therefore, by no stretch of the imagination can the unbudgeted diesel and [short-term power purchase programme] costs be considered as ‘prudently and efficiently incurred’,” he said, adding that offset costs from the Medupi and Kusile power stations for not producing power had not been factored into Eskom’s calculations.

He also argued that there were better alternatives to burning diesel generators, such as power ships.

Presentation after presentation slaughtered Eskom for its nerve in asking for more money while struggling to keep South Africa’s lights on. Eskom’s bad management was a constant theme at the hearings.

Almost every speaker argued that South Africa simply could not afford another price increase.

Eyebrows were raised when one of Eskom’s presentation slides showed that 50% of Eskom’s power plants produced less power days after maintenance had been completed on them. 

The slide led to an argument between Molefe and Nersa panel member Thembani Bukula, with the former arguing that it was actually only 10% despite the evidence contained in his utility’s slide.

Nhlanhla Ngidi of the SA Local Government Association said people simply could not afford hikes that were more than twice the rate of inflation.

He said municipalities were already suffering because people did not pay their electricity bills and this hike might be the straw that broke the camel’s back.

nersa  |  eskom tariff increase


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