No load shedding but Eskom still in a dark tunnel

Eskom’s financial woes remain, despite the national electricity grid stabilising.

During bouts of heavy load shedding in recent years, which adversely affected households and brought businesses to a halt, South Africa’s power utility was forced to enter into multimillion-rand 20-year contracts with independent power producers (IPPs) – but without the option of an exit, according to chair Mteto Nyati.

Addressing the board and management of the State Information Technology Agency, Nyati said Eskom entered into long-term IPP, with “the exit clause linked to performance, but we are stuck for up to 20 years”.

Prioritise unbundling

Nyati said the Eskom-IPP contracts were driven by the power utility’s objective to curb recurring load shedding.

Among nine Eskom priorities, Nyati said the state-owned company moved to unbundle and create the Transmission Company of South Africa.

“Instead of doing everything in one go, we decided to prioritise unbundling – considering generation, distribution and transmission,” Nyati said.

“We decided the one that will have the most impact in helping our country to move more in the market environment, is transmission, because it is about buying and selling electricity.”

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He said competition was healthy for Eskom “because it teaches us to up our own game”.

“In looking at tariffs, we are convinced a market competing with Eskom will help to drive down the costs.

“Although creating competitors may be working against us, we are driven on what is the right thing for South Africa.

“Affordable tariffs are the focus and to do that you have to introduce competitors to Eskom.

“Unbundling of transmission was part of the plan,” Nyati said.

“We were unable to do that timeously, because we wanted the banks to approve the separation of the entity from Eskom, a process which took longer.

“Now we have the Transmission Company of South Africa, which is independent, with its own board – a 100% subsidiary of Eskom.

“We should also not confuse unbundling with privatisation,” Nyati said.

Eskom’s turnaround

Reflecting on the Eskom turnaround strategy, which has led to little load shedding, Nyati said: “We come from a background when there were only six power stations contributing 75% to Eskom.

“People were afraid to make decisions because they were in acting positions. We had to ensure accountability at all levels.

“To turn things around, we brought in independent people at the cost of R60 million to work with management in ensuring implementation.

“We would go to a power station and find management delivering stones instead of coal. We introduced a three-year 7% salary increase with unions to create stability.

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“We built a direct relationship with original equipment manufacturers – not using people who did not have skills.

“Our initial problem was overcoming the national Treasury policy on localisation.

“We are now six months without load shedding, when in the past we had 18 000MW of unplanned outages,” Nyati claimed.

“We now have more supply than demand, having to switch off some of the power stations. Our biggest headache is paying IPPs due to our contracts with them.”

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