Kevin Mileham: Struggling ESKOM plunges millions into the dark - again…

Millions of South Africans were plunged into peak-hour darkness again last night. In this interview with BizNews, Kevin Mileham, the Democratic Alliance (DA) spokesperson on Electricity and Energy, says that ESKOM's fleet is running at 28% unplanned outages - and that “this last week, they've burned 210 million rands worth of diesel to keep the lights on.” As for sabotage, Mileham says: “I think that we've come a long way in that respect, that there's less, to use that word, sabotage than there was before… and I think that certainly the department and ESKOM are taking steps in that regard to weed those people out and take the necessary action against them. It's not happening as quickly as I would like, but there are steps being taken.” ESKOM is also battling the financial impact of corruption . “I think one of the challenges that we've got is, and again, I'm going to emphasise State Capture as being part of the problem, that we had a massively corrupt entity where things ran years over time, cost more than double what they were budgeted for. And as a result, ESKOM's balance sheet took a huge hammering.” Meanwhile, Mileham expresses concerns around the National Transmission Company which he says “needs to be really fully independent…it needs to be out of ESKOM's control and more independent minded so that there's a level playing field between ESKOM and the private sector generators.” He notes that ESKOM still behaves in a “very monopolistic fashion; that they aren't willing to play fairly and competitively with other role players”..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here.Listen here.Edited transcript of the interview .Chris Steyn (00:02.487)Millions of South Africans were plunged into peak-hour darkness again last night. We speak to Kevin Mileham, the Democratic Alliance spokesperson on Electricity and Energy.Kevin Mileham (00:16.844)Morning Chris.Chris Steyn (00:19.565)Kevin, just the other day the Electricity Minister predicted that we are going to have no load shedding this winter. What's happening?Kevin Mileham (00:28.494)Well, I think we all saw this coming; that ESKOM's energy availability factor on its coal fleet in particular is not where it should be. And as a result, they are not able to meet demand. As the demand increases, as we go into winter, people using heaters and the like, ESKOM is unable to keep up with demand and therefore has to implement load shedding. So we've seen that for a while. Just this last week. Go ahead.Chris Steyn (00:53.943)DespiteChris Steyn (00:58.517)No, despite all the maintenance, that’s…Kevin Mileham (00:58.734)Just as well. Well, yes, and obviously maintenance is vitally important. But what we're seeing is that ESKOM's fleet is running at 28% unplanned outages. So that means that they're doing maintenance that they haven't planned for. And that's a huge issue that needs to be factored in.Chris Steyn (01:21.955)Now, Eskom is burning three times more diesel now than it did three years ago when De Ruyter was still there. Where's the money coming from?Kevin Mileham (01:31.982)So yeah, you're right. They are burning diesel. This last week, they've burned 210 million rands worth of diesel to keep the lights on. That's a massive amount of money. It's a massive amount of diesel. Now, ESKOM obviously has to recover that and that's why we've had the tariff increases that we've had over the past year where we saw ESKOM asked for a 36% tariff increase and NERSA then granted them a 12.5% increase.And that's the source of the revenue that they use to buy that diesel. They increase the tariffs and they purchase diesel to keep the lights on.Chris Steyn (02:10.893)Now, meanwhile, Eskom wants to spend 100 billion on extending the life of ancient power stations for five years. Have you tried to hold them accountable for this?Kevin Mileham (02:21.602)Look, I do think that we need to ensure that we run our coal-fired fleet for as long as possible. But at the same time, we need to supplement that and we need to increase our generation capacity. And to do that, we need to build new generation as quickly as possible. The reality is that ESKOM don't have the financial strength, the muscle to do that. They certainly can't be building power plants. They certainly don't have hundreds of billions of rands available to them to build a new coal-fired power station or a new nuclear power station at this time. So they're going to have to go to the market and say to the private sector, build us independent power producers, build us a new generation. That's the first thing. The second is that they need to incentivise, and this is more of a government issue, it's not an ESKOM issue, but government needs to incentivise ordinary citizens, businesses and the like to install rooftop solar as quickly as possible - and that will mitigate the demand to a certain degree. If we're looking at the type of generation, first of all, you need to look at what can be brought online as quickly as possible and secondly, where can we connect it to the grid? That's going to be the real constraint that we have at the moment, the grid availability, the connection capacity for new generation.Chris Steyn (03:48.983)Meanwhile, there are concerns that ESKOM management is not fully committed to the unbundling of ESKOM and the establishment of a competitive electricity market. Have you had any explanation from them?Kevin Mileham (04:00.974)ESKOM have appeared before the Portfolio Committee on several occasions over the past couple of months. I will say this, that they certainly do appear to be making progress in the unbundling, in that the National Transmission Company has been set up. It does have its own board. They haven't appointed a full-time CEO at this time. They've just retracted the interim CEO and they need to put a new interim CEO in place, but they haven't appointed a full-time CEO at this time.But my concern in that regard is that the National Transmission Company needs to be really fully independent. And that's something that I'm pushing ESKOM hard on, that it needs to be out of ESKOM's control and more independent minded so that there's a level playing field between ESKOM and the private sector generators. So that's something that I'm pushing for. We have seen that ESKOM announced, I think it was last month, that they will be...creating a new renewable energy generation company. I have a concern with that. I think that generation, regardless of whether it's nuclear or coal or gas or renewables, should all be in the same division or department of ESKOM, should be in the same company of ESKOM. And we don't need to set up a new structure with its own board, with its own management, with its own finance department and legal department and, and, and to, to create a renewable energy company at ESKOM. So I have some concerns about that and it is something that I'm going to be monitoring very closely. I have raised those concerns with the ESKOM CEO and ESKOM management in their last presentation.Chris Steyn (05:42.369)What are the biggest red flags that have popped up in the committee in recent months, Kevin?Kevin Mileham (05:48.078)Wow, well, well, there are a number. So obviously the independence of the operator, the system operator and the National Transmission Company, that's one. The second is the various rules and codes that are administered in order to allow people to trade electricity, to connect to the grid. So you've got the grid access rules, which are administered by ESKOM and written by Eskom. We need to make sure that that's independently administered and independently monitored. So I would argue that that should be dealt with through NERSA rather than through ESKOM. Secondly, the market code, which has just recently been released, there needs to be some work done on that. We need to make sure that our market is competitive and that it has the robustness that is necessary to ensure first of all, that we have a reliable supply of electricity, but secondly, that our grid is stable and able to manage multiple sources of generation as well as multiple off-takers. And that's something that we need to focus on. From an ESKOM perspective, obviously there's a huge issue around reliability and maintenance. There's an issue around the energy availability factor, their uptime. We need to make sure that that improves that you know they've been talking about a 70 - 75 per cent target for for the energy availability factor. Well the reality is they haven't hit 60 per cent once this year. So they're a long way off that target and a lot of work has to be done in that regard.Chris Steyn (07:34.177)A couple years ago, the Electricity Minister expressed grave concerns about sabotage at ESKOM. What is happening with regards to that now?Kevin Mileham (07:43.288)There's a lot of work being done to clean up the...problem areas where there's been misconduct, where there's been financial misconduct, where there's criminal misconduct and the like, where people have been putting stones in amongst the coal and things like that. So there's been a lot of work done in that regard. I think that we've come a long way in that respect, that there's less, to use that word, sabotage than there was before. I don't think that we will ever get away from people taking chances and the like, but the people that I've met on the ground at ESKOM in the plants take their job seriously, they take their work seriously, and they're doing the right thing. I think there are unscrupulous people, and I think that certainly the department and ESKOM are taking steps in that regard to weed those people out and take the necessary action against them. It's not happening as quickly as I would like, but there are steps being taken.Chris Steyn (08:47.649)Have any fresh allegations of corruption come your way?Kevin Mileham (08:52.738)I haven't seen any for a while. I'm certainly chasing up on many that go back to the State Capture era and the like, but I haven't seen any new ones of late. So hopefully things are improving in that regard. Obviously I would like to see ESKOM succeed. I think that ESKOM is a key role player in South Africa's electricity sector and we need to make them succeed, but we need to make sure that electricity is both available to all South Africans and affordable to all South Africans. And then we need to take into account our commitments to climate change and environmental responsibility and the like. But availability and affordability are key factors and ESKOM plays a big role in that regard. So we need to make sure that ESKOM is able to do that.Chris Steyn (09:44.419)How? What are the realistic prospects of affordable regular electricity supply for ordinary South Africans?Kevin Mileham (09:54.51)It's a big ask. So, you know, it's a bit like chicken and the egg. You can't connect more people to the grid until you've got the electricity to provide them. So you've got to build the generation and the grid and then connect the people to it, which is all costly and necessary. I think one of the challenges that we've got is, and again, I'm going to emphasise State Capture as being part of the problem, that we had a massively corrupt entity where things ran years over time, cost more than double what they were budgeted for. And as a result, ESKOM's balance sheet took a huge hammering. So I think that there's been some challenges and I think Eskom is recovering from those challenges. We're starting to see the debt come down. We're starting to see consequence management play out. We're starting to see that people are being held accountable for their actions. We're starting to see that the right things are being done. I do think that ESKOM still behaves in a very monopolistic fashion; that they aren't willing to play fairly and competitively with other role players. And that's going to be a challenge going forward. And it's something that the regulator, NERSA, as well as the system operator are going to have to come to grips with. How do we create a competitive electricity sector where people can say, you know what, I don't want to use ESKOM, I want to use another supplier because either they're cheaper or they're greener or whatever it might be, whatever reason they choose that they have that option to use another supplier.Chris Steyn (11:42.797)Thank you. That was Kevin Mileham, the Democratic Alliance spokesperson on Electricity and Energy speaking to BizNews after the return of load shedding. I'm Chris Steyn. Thank you, Kevin.Kevin Mileham (11:54.83)Thank you.

Kevin Mileham: Struggling ESKOM plunges millions into the dark - again…

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