Load shedding: Eskom's coal crisis in a nutshell | Fin24
 
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Load shedding: Eskom's coal crisis in a nutshell

Nov 14 2018 08:30
Marelise van der Merwe, Fin24

Eskom is running low on coal; municipal debt has ballooned by another R2bn since May and the risk of load shedding is "very high". Here's what you need to know in a nutshell. 

What is the current status of Eskom's coal stockpiles?

Eskom currently has a total coal stockpile of 25 days. However, some stations are affected worse than others.

The 10 worst affected stations are Arnot, Camden, Duvha, Hendrina, Komati, Kriel, Kendal, Majuba, Matla and Tutuka, all in Mpumalanga Province. These stations all have less than 20 days of coal, with five of them having less than 10 days of coal, Eskom spokesperson Khulu Phasiwe told Fin24.

The situation has measurably deteriorated since previous check points earlier in the year, he added, when stock piles stood at 28 days's worth of coal.

"Clearly there has been a reduction. It is a matter of major concern," he said.

How likely is load shedding?

Very. Eskom is doing "everything possible to mitigate it", Phasiwe said, but "the risk of load shedding is very high".

What is being done about it?

Eskom is in contact with the National Energy Regulator of South Africa (Nersa) regarding the next steps. In the meantime, Eskom's action plan rests on three main prongs:

·         Bringing in extra coal as a relief measure. Some is being transported by truck, and there is also an agreement in place with Transnet to bring in extra coal reserves by rail.

·         Signing new contracts. While 14 new suppliers are on the horizon, some will only kick in next year. Phasiwe says six suppliers have been willing to start with immediate effect, with four starting this month or early next month.

·         Relying on diesel as an interim measure to supply power.

What's the impact of relying on diesel?

We don’t know yet. According to Phasiwe, Eskom will have a "fuller picture" by Friday, which includes some of the cost calculations.

In May, however, Mail & Guardian reported that Eskom's expenditure on diesel for open cycle gas turbines had increased 30-fold in the first five months of the year alone. Following several fuel price increases throughout the year, SA faced yet another hike in the diesel price early in November.

The cost of relying on diesel is worth preventing load shedding if possible, Phasiwe told Fin24. The cost of load shedding is far higher, he said.

"It is a small price to pay for what South Africa would lose if there were load shedding. So we will continue to run the diesel generators for as long as possible."

Eskom suffered a net loss of R2.3bn in 2018.

What is the likely scenario for Eskom’s ability to meet electricity demand for a) the next month b) the next six months c) the next five years?

According to Phasiwe, "The intention is to recover as quickly as possible to ensure that Eskom becomes operationally and financially sustainable."

The aim is to bounce back ASAP and expand supply, he said, though he acknowledged the financial and operational challenges hampering this goal.

"One of our mandates is to electrify rural areas," he told Fin24. "We have to obviously make sure they are connected to the grid."

Despite ongoing hurdles, he added, there has been some progress. SA has gone from 35% electrification in 1994 to over 85% in 2016. "It may not sound like much. But we have travelled a long distance, although we still have a long way to go."

What kind of timeline are we looking at for short-term improvement?

Hard to say. Load shedding is "a function of not having enough coal or having a lot of problems", Phasiwe explained, which means the risk is variable. "So far, we are managing that risk, but if we have multiple breakdowns or a shortage of diesel there will be a problem," he told Fin24.

However, a ballpark guess is that Eskom hopes for improvement by March 2019.

Where's the money going to come from?

Great question. The Standing Committee on Public Accounts (Scopa) heard from Eskom and the high-level panel tasked with resolving the power utility’s municipal debt crisis in Parliament on Tuesday.

Phasiwe told Fin24 that since the last time Eskom had reported on the matter in Parliament in May, municipal debt alone had ballooned by approximately R2bn. It now stands at around R17bn.

"Municipal debt is a big problem," he said. "Clearly that is not sustainable. We need that money so that we can buy coal and diesel. We are not going to be financially and operationally sustainable. For us to keep the power system running, we must do maintenance."

Eskom was recently prevented from cutting off electricity supply to defaulting municipalities in court.

Earlier this month, it was also reported that consultations were approved for possible management job cuts to save costs at the cash-strapped power utility.

Ahead of the Medium Term Budget Policy Statement in October, Finance Minister Tito Mboweni said he was expecting the Eskom board's new turnaround strategy within days. Treasury director general Dondo Mogajane added that Eskom had raised R72bn, more than 80% of the funding it pursued for the 2019/20 financial year.

In the same week, Eskom applied to Nersa for a 15% tariff increase.

Bonus question: Anything else Eskom wants to tell the public?

"For us, we'd like to assure SA that we will do everything possible to avoid load shedding. However, sometimes it becomes difficult for us to keep up with the demand," Phasiwe told Fin24.

"If we do have to implement load shedding, we really do apologise. We are in a process where we would like investors to come to South Africa, and investors must come to an area where there is security of power supply."

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eskom  |  khulu phasiwe  |  coal shortage  |  load shedding
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