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Eskom can't say if Gupta-coal quality is better

Jul 07 2017 16:07
Yolandi Groenewald

Pretoria – Eskom's lack of transparency came under fire at a regulatory hearing on Friday, with critics lashing out at its apparent inability to account for coal burning quality at different power stations.

National energy regulator Nersa conducted public hearings regarding a request from Eskom to deviate from its usual methodology in determining tariff increases for next year. The methodology provides critical information Nersa can then scrutinise to determine whether a tariff hike is justified.

Friday's hearing would have been held in private, but action group OUTA convinced the regulator to conduct it in public.

How much coal was burnt?

Calib Cassim, Eskom's general manager of financial planning and economic regulation, told the regulator that the state utility would not be able to provide information on coal usage and coal handling and water treatment costs, among other items.

"It would not be possible to attribute burn costs and volumes to contract types and suppliers," he said. "The only way would be to make theoretical assumptions."

Cassim said while Eskom keeps record of its coal purchases, once the coal arrives at a power station it is simply dumped into a stockpile and no record is kept of which coal from which supplier is burnt. There is thus no measuring tool to determine the quality of coal from a specific supplier.

Eskom would also not be able to do a regulatory asset base valuation as required by Nersa.

'Cesspool of corruption'

OUTA energy director Ted Blom was scathing in his presentation, calling Eskom a cesspool of corruption that refuses to be held accountable. He said transparency is non-existent at the utility, and called for an audit.

"I've heard a lot of doublespeak here today, with Eskom saying they want to but can't, and then saying they won't and then concluding they are not able to," he said.

Blom pointed to allegations of corruption and irregular coal contracts, which will soon be investigated by a Special Investigating Unit (SIU) inquiry, adding that it seems Eskom wants to hide the fact that "Gupta-coal" is being bought at double the price.

He pointed to allegations of corruption and irregular coal contracts, which will soon be investigated by the SIU.

Blom said Eskom previously “blindsided” the energy regulator by saying it was operating efficiently and tariff increases were warranted. “This was patently a massive lie perpetuated from 2007 onwards to date, and resulting in an additional R1trn in Eskom revenue over this period, which has gone to waste or been stolen."

Business Unity South Africa (BUSA) opposed Eskom’s application to raise electricity tariffs without justification, saying it is not in line with good governance and accountability. Price increases should be “considered and prescribed” with “full disclosure” of relevant information by Eskom.

BUSA's Jane Molony said information transparency at Eskom is critical. Without it, the country is operating in deep fog. 

Greenpeace's Happy Khambule said Eskom's deviations, diverging, hustle and shuffling are leaving Nersa and South Africa powerless.

Valid concerns

Nersa commissioners also questioned why Eskom has not taken Nersa's prescribed methodology to the high court for review.

Cassim admitted the concerns are valid, and that Eskom would work harder to close the gaps.

Eskom's deviation application comes after it implemented Nersa’s decision of an average 2.2% tariff increase for the 2017/18 financial year in June.

The latest application relates to Eskom's tariff hike application for next year. Eskom's board in June approved a draft revenue application for Nersa’s approval, after a leaked document showed it wants clients to pay 19.9% more from April 1 2018.

Nersa chair Mbulelo Ncetezo told Fin24 that the regulator expects to rule on the deviation request by September. He admitted that this would create a tight timeline to process next year's application.

"It will be a challenging process, but we will make it work," he said.

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