Life after Brian

Feb 06 2017 14:45
James-Brent Styan

Once again Eskom enters a new year with no chief executive. 

Brian Molefe, hailed by many from various sectors as the saviour of Eskom who did away with load-shedding forever, has resigned. Molefe’s resignation followed shortly after a controversial report by the Public Protector on state capture, in which Molefe and Eskom featured prominently. For Molefe, the shadow cast was seemingly too long and it appears he decided to get out of the spotlight. 

Enter Eskom acting CEO Matshela Koko, who has taken to using social media to express his views on energy matters, focusing on renewable energy, nuclear power and transformation. In reading his tweets, it becomes a little clearer what Eskom might look like should Koko be appointed CEO permanently. 

The acting CEO essentially has three messages. First, he is a huge fan of nuclear energy. Second, he is not a big proponent of renewable energy and SA’s Renewable Energy Independent Power Producers Program (REIPP). He believes renewable energy is too expensive. 

In terms of the REIPP Eskom must buy electricity from independent contractors at rates determined by the National Energy Regulator (Nersa). Koko seems to believe that the rates the IPPs are paid are too high. He says Eskom will never pay more than 77c per kilowatt hour (kWh) for (new) wind and solar power contracts. He also states that Eskom’s target is 62c/kWh. He tweets that “more than that is a rip-off”. 

He says Eskom has enough surplus capacity on its system to no longer deem it necessary to negotiate (further) contracts with independent energy suppliers. At the same time, Koko is pushing very hard for a new nuclear build programme – harder than any other person to occupy the CEO position in any capacity before him. 

Sadly, he is silent on the cost implications such a venture. The potential cost per kilowatt hour for a new nuclear reactor will most definitely be far in excess of 77c/kWh. 

The third message relates to transformation and it seems Koko is very determined to drive ANC policy ideas – nothing has been formalised yet – to the hilt at Eskom. One example is the comments on coal mining giant Exxaro’s plans to reduce its black ownership from 51% to 30%. 

Eskom’s coal procurement policy has shifted to one where the company only wants to buy coal from majority black-owned suppliers. 

To date, Exxaro has been one of the biggest and most transformed Eskom suppliers. Koko seems to ignore the fact that Exxaro’s (majority black) shareholders voted in favour of reducing the black ownership of the company. Without any insight into why Exxaro may need to do this transaction, Koko just says that Exxaro is showing “Eskom a finger”. 

Another major change is that Koko’s Eskom is cutting off rural municipalities for not paying their debts. The interruption of electricity supply is presently mainly occuring in the Free State, North West, Mpumalanga and Northern Cape.

“We are compelled to resort to this step in consideration of Eskom’s financial sustainability,” Koko says in a statement on the matter. 

Looking at Eskom’s debtor analysis, the action does seem needed now more than ever. According to the analysis – available on the utility’s website – for the financial year to 31 March 2016, municipalities owed Eskom R11.3bn. The interim results for the six months to 30 September 2016 show that matters are getting worse and municipal debt has increased to R15.4bn. A real curiosity is that he is cutting off these poor rural municipalities while yet, to date, there has been no discernible action taken against the suburb of Soweto, whose debt is rampant – and still increasing. 

For the 2016 financial year to 31 March 2016 Soweto owed the paratstal R4.7bn (excluding interest). For this period, Eskom stated that the average Soweto collection level had improved from 16% to 18%. That means 18 out of 100 electricity consumers in Soweto were paying their bills. 

The latest interim results for the six months to 30 September 2016 show that Soweto’s debt has increased to R5.1bn, of which R4.8bn is older than 60 days. In addition, the power utility notes that the average Soweto collection level has again declined from 18% to 14%. 

Eskom insists that it is dealing with the issue by waiving debt as an incentive for consumers to convert to prepaid meters. If this were a successful intervention, surely Soweto’s debt wouldn’t be going up? Also, if Sowetans can get debt waived, why not poor rural municipalities? 

Why are Eskom’s 180 000 clients in Soweto getting such preferential treatment? 

James-Brent Styanauthored a book on the energy crisis titled Blackout: The Eskom Crisis, published in 2015. He writes here in his personal capacity. 

This article originally appeared in the 2 February edition of finweek. Buy and download the magazine here.