Eskom may need more than the 32.66% hike it has already asked for 

While South Africans have been free from load-shedding for the past nine days, our troubles with the state-owned energy supplier Eskom are far from over. There has been plenty of discussion regarding Eskom and its inability to provide the needed power to South Africans. This has been caused by a mismanagement of infrastructure, as well as corruption and theft of infrastructure and equipment by Eskom employees. President Cyril Ramaphosa has provided a set of solutions to improve the energy situation in South Africa. One aspect of this is to purchase excess energy from the private sector – and to rehire former skilled workers after they were let go. However, this is going to cost more than Eskom had expected, and the cost will surely be handed on to consumers, adding to the 32.66% increase the company has already requested from the National Energy Regulator of South Africa (Nersa). More in this article which first appeared on MyBroadband. – Ross Sinclair

Eskom warns 32.66% electricity price hike might not be enough

By Myles Illidge

Eskom applied to the National Energy Regulator of South Africa (Nersa) for a 32.66% electricity tariff increase from 1 April 2023 and will now have to adjust its application after President Cyril Ramaphosa’s power plan announcement.

This is according to Eskom’s chief financial officer Calib Cassim, who told Rapport that it would need to be adjusted to account for additional power purchases and other expenses relating to Ramaphosa’s power plan.

On 25 July, the President revealed government’s plan to end load-shedding and save Eskom — including surplus power purchases and re-hiring skilled engineers.

“One of the challenges that Eskom has faced has been the shortage of skilled personnel and engineers,” Ramaphosa said.

“The utility is now recruiting skilled personnel, including forming Eskom senior plant managers and engineers from the private sector.”

Days before Ramaphosa’s speech, public enterprises minister Pravin Gordhan accepted labour union Solidarity’s standing offer to provide a list of former Eskom engineers willing to return to the state-owned power utility.

Ramaphosa also revealed plans to add additional capacity to the grid by buying surplus power from independent power producers but did not specify who would provide the necessary funding.

Cassim explained that independent power producers would need to provide surplus power at a lower price than what it costs to run Eskom’s diesel generators that support its coal power fleet.

If they did, it would make sense to use the cheaper option, he said.

According to Rapport, Nersa isn’t happy with how much Eskom uses its diesel-power open-cycle gas turbines, saying that it is the power utility’s own fault that its coal fleet — which produces cheaper electricity — is insufficient.

Nersa has published a consultation paper on its website regarding Eskom’s tariff application.

It notes that if the settlements from all Eskom’s legal challenges against Nersa’s previous tariff decisions are factored in, South Africa’s overall electricity increase for next year would be 38.1%.

Regarding the plan to increase maintenance on the ailing coal-generation fleet, Cassim said Eskom has enough budget — R8.1 billion — to conduct its planned maintenance for the current financial year.

However, he explained it would need time for thorough planning to increase maintenance and obtain necessary parts. Eskom expects its maintenance budget for the next financial year to be around R10 billion.

Despite this, Eskom is asking for about R20 billion a year for maintenance for Nersa. However, it is seldom granted as much as it requests.

As part of its initial application, Eskom is asking for R85 billion for purchasing power from independent power suppliers in 2023/24 and R101 billion for the subsequent year.

Another part of Ramaphosa’s rescue plan for Eskom includes supporting the power utility through debt relief.

However, Cassim warned that debt relief alone wouldn’t be sufficient without tariff increases and improved consumer debt collection.

The full spectrum of Ramaphosa’s plan includes:

  • Bringing back former Eskom employees to ensure the right skills and leadership are in place
  • Make sure Eskom has a budget for necessary maintenance
  • Stabilising diesel supplies
  • Allowing Eskom to procure excess energy from own-power and independent power producers with a standard offer
  • Adopting a “pragmatic” approach to local content requirements for renewable energy projects

Ramaphosa said the power utility would also import electricity from neighbouring countries through the Southern African power pool arrangement.

He added that government’s decision to raise the 100MW ceiling for private power producers had unlocked a pipeline of 80 confirmed projects with a combined capacity of over 6,000MW.

Due to the enthusiasm with which the private sector responded to the invitation to produce their own power, Ramaphosa said government would do away with the embedded generation threshold altogether.

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