Eskom needs money to keep lights on

Picture courtesy of

Picture courtesy of

Three government departments are trying to find money to enable Eskom to keep the lights on and a tariff increase cannot be ruled out, Malusi Gigaba Minister of Public Enterprises, said yesterday.

Gigaba addressed journalists and stakeholders at Eskom’s quarterly State of the System briefing days after the utility declared power emergencies on February 20 and 21. This procedure, that triggers compulsory savings from large industrial customers, was only before invoked once in November last year.

CEO Brian Dames said the emergency was necessary to enable Eskom to stabiliSe the electricity system and prevent it from total collapse.

The reserve margin deteriorated from a year ago when Eskom had a scheme in place to buy back power from large customers to curb demand and its Short Term Power Purchase Program (STPPP) through which it bought electricity from private generators like Sasol and Sappi as well as municipal generators, to augment supply by 635MW.

The National Energy Regulator (Nersa) disallowed the power buy-backs and no provision was made in its price determination for the STPPP. The absence of these two factors makes a difference of about 500MW during the day, Dames said.

Gigaba said the STPPP should be renewed and demand side management should be pursued aggressively. Since 2005 total savings of about 3 500MW – equal large power station – have been achieved through the Demand Side Programme, Dames said.

It is for these measures that National Treasury, the Department of Public Enterprises that has oversight over Eskom, and the Department of Energy are seeking funds, Gigaba said. He said there are different options under consideration and “the tariff cannot be ruled out, as long as Eskom has incurred costs prudently”.

Nersa is currently reconciling the Regulatory Clearing Account, a mechanism to deal with over- and under-expenditure at Eskom, compared with the revenue allocated by the regulator in a relevant year. Nersa is expected to complete the 2012/13 reconciliation shortly. Over-expenditure, if prudently incurred, can be clawed back through a tariff increase over and above the 8% per year granted for every year until 2018.

Gigaba said the public will be updated about progress to find the necessary funds.

Dames said at the briefing that due to the constrained system it is using its open-cycle gas excessively.

In the first half of the financial year the over-expenditure in this regard amounted to about R2 billion. Dames said Eskom’s staff is working very hard to keep the lights on. “The cost is high in human and financial resources.”

He said the system will remain under huge pressure for the rest of the summer, through winter and until “substantial” new generation capacity is available.

Eskom is prioritising the

maintenance of its plant in order the ensure sustainability in the long run.

Dames said progress is being made at Medupi and Kusile and the expectation is still that Medupi will deliver its first power to the grid before the end of this year and Kusile a year later.

Dames said savings by customers enable Eskom to keep the lights on during the emergency and he pleaded on South African to keep on saving electricity.




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