The latest Eskom Emergency: Two years before maintenance backlog catches up. For now, next week and a half is critical

Eskom GM Andrew Etzinger is one of the often criticised utility’s best assets. He’s been thrown in the deep end more times than he’d care to remember, and is back in the firing line this week as Eskom declared an emergency situation on power supply – sparked this time by a water leak at the Duvha power station. Etzinger provided the background on the latest potential crisis which he says is not specifically a Duvha issue. Rather, it’s because maintenance backlogs identified during the crisis of 2008 have not yet been caught up. The next week and a half is critical: Etzinger reckons if we can get past that, a repeat of the 2008 rolling blackouts will be avoided. We also asked him for input on the Midrand residents who had to take Eskom to court before it removed illegally positioned pylons. – AH 

To watch this CNBC Power Lunch video click hereAndre Etzinger - Escom

ALEC HOGG:  We’re onto the Eskom story now and Eskom has said that large companies must cut down on their electricity consumption as the state-owned utility is facing a power crisis.  We are very happy to have Andrew Etzinger in the studio with us, from Eskom, and reinstated now as the company Spokesman.  Andrew, it’s nice to have you here.  What’s the story?  Just take us through – we will get to Duvha in a moment – but how serious is the problem?

ANDREW ETZINGER:   Alec, I would say it’s as serious as it has been since 2008.  I think the last time I was in the studio with you was in 2008 during the load shedding. So yes it is serious, but it’s nowhere near as serious as we had in 2008.  We’re saying that for the next two weeks we will be constrained with the low reserve margin.  Unfortunately, that translates into risk and as we know statistically, things do go wrong from time to time and that’s what we saw on Tuesday.

ALEC HOGG:   So it’s two weeks.

ANDREW ETZINGER:  Yes, until next Friday and after that, the Festive Period comes in, holidays come in, and we naturally see a drop in electricity demand, which will give us the reserve margin we need again.

ALEC HOGG:   The DA has been going on at you in Parliament.  They’re not the only people.  It’s Duvha where the problem has recurred.  Is there a management issue at that power station?

ANDREW ETZINGER:  There’s good management within the Duvha power station.  This is not about Duvha.  This is about a number of generators across the Eskom future power stations where the problems occur from time to time.  It’s Duvha one day and it will be another power station on another day.  The root cause of this is maintenance, which has been deferred for many years across the fleet, which has made the fleet less reliable than it needs to be.  That will be at Duvha and all our stations.  What we are doing at the moment is a very aggressive approach towards maintenance.  We have many plants out for planned maintenance, including the plant at Duvha, to make sure that it performs better in the long run, but that just gives us a low reserve margin.  Duvha was therefore merely the straw on the camel’s back.  It was never about Duvha.  It’s a well-managed power station, but again, it’s been driven extremely hard and under-maintained and we need to catch up.

GUGULETHU MFUPHI:  Would these increased maintenance costs maybe cost your company quite a significant amount of money?

ANDREW ETZINGER:  Certainly, maintenance costs money, but that has been built into our financial forecasts and is catered to in terms of what the Regulator has granted us in terms of costs.  That is extremely small in relation to the benefit that we get from maintenance.  You can just imagine; those power stations will simply not last if they’re not properly maintained.

ALEC HOGG:  When are you going to catch up?

ANDREW ETZINGER:  It’s going to take about two years to catch up to full maintenance, and bearing in mind that our power stations on average are 30 years old.  The average power station is 30 years old.  It needs a lot more maintenance to begin with, so do we ever catch up?  It’s just a regime that’s going to have to be continuously rolled out from here for the rest of these power stations’ lives.

ALEC HOGG:  What you’ve told us now is not filling me with a lot of confidence – maybe it is to you, Gugu? (shakes head) Andrew, you’re saying to us: maintenance has been poor for many years.  It’s going to take two more years to catch up.  My goodness, we were hoping that by this time, the new Medupi plant was going to kick in and we’d be able to plan for a growth economy again.

ANDREW ETZINGER:  Certainly, had Medupi or any other plant been on line, the new power station would have alleviated the situation.  However, in reality as you’ve said, we have deferred maintenance. The plant is still a good plant.  I’m not saying it’s falling to pieces, but it is becoming less reliable and that’s what I’m referring to.  Had Medupi – let’s take the first generator – been on line at this time, it really would have meant that we would have simply taken another plant out somewhere at another power station for maintenance.  It would have been great to do it, but it’s not an instant fix to this situation.  The backlog, all the way back to 2008 has been with us.

GUGULETHU MFUPHI:  At the top of the show Andrew, I made mention to Alec and he wasn’t too pleased about a foreign analyst’s comments regarding how Eskom might have structural issues with regard to these power cuts, and how they might impact on FDI.  Is that a concern for you as to how the foreign community views South Africa with regard to such issues?

ANDREW ETZINGER:  Of course it is, and our large industrial customers have taken a lot of pain, and that translates into a lot of sacrifice over the last two days.  We’re therefore working very hard to make sure that we – as soon as possible – lift the emergency which we declared, and allow them to go back to full production because it does of course affect sentiment, investment, and public psyche as well.  I think as soon as we get back out of the situation, the better.  We have a few more days of constraints and then from there it’s hopefully plain sailing.  What’s really important – and we need to ask this – is that all South Africans please use electricity conservatively.  If we get the conservation from South Africans, we can give the power back to large industry and get them going that much sooner.  It’s about a collective effort that we need at the time between the country and Eskom.

ALEC HOGG:  It’s a couple of weeks.  It’s not a structural issue.  That was really my point.  Surely, in two weeks’ time…  But do we believe you this time?

ANDREW ETZINGER:   I don’t believe it’s a structural issue.  Eskom is a fundamentally sound company and the approach that we’ve taken towards our maintenance is supported – actually – by the large industrial customers too, who take a very active interest in Eskom.  We share our information on an ongoing basis with them.  They fully understand the situation and the risks we needed to take on our grid in order to catch up on the maintenance, because the long-term prosperity, the success, and the sustainability of our industry depends on proper, thorough, and deep maintenance now, which is what we’re doing.

ALEC HOGG:  Andrew, I don’t want to ambush you but we tried to get hold of Eskom on the Midrand story with the power lines that were put up.  Then you went to court and it cost millions of rand.  You didn’t want to take them down.  Then you had to go back to court again and you took them down.  We haven’t been able to get Eskom’s side of the story.  We have the other side of the story, which says that Eskom really has handled this badly.  Have you personally been exposed to this issue?

ANDREW ETZINGER:  Well certainly, this has been to court, the court has made a ruling, and we abide by that.  It’s as simple as that. Bearing in mind that we have hundreds of thousands of kilometres of power lines across the country, there will be times unfortunately where these power lines encroach on living settlements.  It’s becoming increasingly difficult for utilities around the world, in fact, to find lovely open meadows where you can run power lines

ALEC HOGG:  Sure, but are you going to rebuild those power lines?  Andrew Norton told us you’re going to put them back up where they were.

ANDREW ETZINGER:  No – not at the place where they were, but at a place which complies with the requirements of the court.  We certainly accept the judgment, but at the same time we have to make sure that not only is power secure at a generation level – that’s what we’ve been talking about – but at a network level as well.  That means we need to find some way through to provide reliable electricity, not based on one line, but on the national network, which is what this is about.

ALEC HOGG:   So we take a deep breath for two weeks, hope nothing goes wrong thereafter, and we should be back to normal.

ANDREW ETZINGER:  One and a half weeks.

ALEC HOGG:   One and a half weeks.

GUGULETHU MFUPHI:  It’s come down.  Thanks so much to Andrew Etzinger who is from Eskom.

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