Energy expert Ted Blom says that Eskom is in crisis, which is evident by the current daily load-shedding schedule being implemented as the state owned company struggles with coal shortages and rising maintenance costs.
Load shedding is conducted rotationally as a measure of last resort to protect the power system from a total collapse or blackout – but speaking to Jacaranda, Blom said that Eskom is in a daily fight to keep the power from being turned off completely.
Worryingly, a scenario where the power could go off, and not come back on again is definitely possible, the expert said.
“It is a possibility every day, because if the demand for electricity exceeds the availability of electricity with 1 KW, then the network will fail. We are on the brink every day. That is a daily fight,” he said.
Blom said that if a team at the control centre in Simmerpan goes to sleep for a single second, and demand exceeds supply, “it will be like putting a spanner into your bicycle wheel, the whole system will just collapse”.
If preventative measures fail, or load shedding is insufficient, the national grid will collapse leading to a nation-wide blackout.
And should Eskom’s preventative measures fail, the consequences would be disastrous – and it would take weeks to rectify, Eskom has said.
While most South Africans will be familiar with 4 stages of load shedding, Eskom recently extended this to 8 stages in total, which will allow up to 8000 MW of power to be shed in extreme circumstances, to further prevent a total blackout.
Get ready to pay double for electricity
Responding to a question about the privatisation of Eskom to alleviate some of its financial and operational pressures, Blom said that the company’s assets are ‘grossly’ overvalued.
“Eskom actually has a new asset value,” he said, adding that the excess in tariff increases – as well as the excess in borrowings – has seen Eskom incur R1.4 trillion over the past 10 years.
“That’s the size of the problem.”
Eskom is currently looking to hike tariffs by 15% over the next three years, and with additional extras, this will lead to a 60% by 2021, Blom said. Further, by 2022, he expects consumers will pay double what they currently pay for electricity in the country.
The Organisation Undoing Tax Abuse (Outa) said on Monday that it has submitted objections to Eskom’s requested price increases to the National Energy Regulator (NERSA).
“Outa believes that Eskom’s woes are due to challenges embedded in its business model which cannot be addressed by merely raising tariffs. Instead, this requires a holistic solution which has yet to be provided. Outa particularly opposes the price increases due to Eskom’s long history of corruption, mismanagement, overspending and inefficiency,” it said.
The lobby group said that the first is the Multi-Year Price Determination (MYPD4) application to set electricity prices for 2019/20 to 2021/22. The second is the application in terms of the Regulatory Clearing Account (RCA) for under-recovery during 2017/18.
In the MYPD4 application, Eskom wants an increase in revenue which requires a price increase of 15% a year, in addition to the 4.4% increase from the already approved RCA award for 2014 to 2017.
“Eskom’s 15% per annum electricity price increase over the next three years is premised on desperate measures or attempts by Eskom to want to fix structural problems by throwing money at the problem rather than addressing or fixing the underlying root causes,” said Outa.
Problem is just getting worse
Outa said it is concerned about Eskom’s runaway costs, including its huge wage bill, its coal spending, its massive debt which has ballooned to almost R400 billion and is expected to grow to more than R600 billion, and the ever-increasing cost of the new build. These are factors built into the price application.
Eskom’s primary energy costs have increased from about R18 billion to R85 billion over the last decade, although electricity sales have stagnated, Outa said.
“Eskom’s coal contracts have been a breeding ground for corruption, which helped inflate primary energy costs massively over recent years.”
The group said it is concerned about the revaluation of Eskom’s regulated asset base (RAB), the value of Eskom’s assets, which was substantially revalued from R717.513 billion in 2017/18 to R1 268.310 billion for 2019/20. This affects the pricing claim, it said.
Outa’s portfolio manager on energy, Ronald Chauke, said that Eskom is in bad shape.
“The utility is unable to meet electricity demand during weekends of low demand and is back to load shedding. Political meddling at Eskom has basically rendered it a hopeless strategic asset that holds the whole country to ransom.
“This is unacceptable and immediate action is required to start unbundling this grossly inefficient entity. Eskom’s leadership must be held accountable to keep the lights on and resolve these chronic operational and performance failures without delay,” said Chauke.
