Public flips the switches in Eskom debate

The public hearings being held by the National Energy Regulator of South Africa (Nersa) on Eskom’s controversial request for a threefold 35% electricity increase are generating some sharp rays of light in an otherwise dark period for the country.

Eskom is, unsurprisingly, not emitting this light, which instead comes from myriad suggestions about how to deal with the electricity crisis. The intensity of the public’s engagement with Eskom’s plea for more money is itself a cause for hope.

From farmers to ratepayers, miners to trade unionists, bankers to academics, engineers to environmentalists, all have done their homework. Despite not having full access to all Eskom’s financial and contractual information—which Nersa will have—various groups have crunched the numbers the parastatal is using to justify its (revised) application.

The numbers show that such a swift and steep increase may hamper the country’s recovery from the economic crisis, curb its growth and threaten jobs.

Ideas about ways to prevent this include splitting South Africa into two time zones, introducing daylight saving and spreading the demand across peak times—a suggestion from the South African Institute of Electrical Engineers.

From trade union Solidarity comes the proposal to grant an increase of 25% but control more tightly items such as Eskom’s coal costs and curb the ratcheting up of prices by other parties, particularly municipalities.

Common points have emerged from diverse presentations at the hearings. Support for independent power producers (IPPs) is one, as is the criticism that Eskom may not have calculated its costs or valued its assets appropriately.

And the suggestion that Eskom should sell off assets, such as power stations, to meet its funding requirements and further delay, if not halt entirely, the building of the Kusile power station has been made more than once.

Representing some of the largest electricity users in the country, The Energy Intensive Users’ Group (EIUG) maintains “that an appropriate legal and regulatory framework to convert South Africa from an IPP-hostile environment to facilitate the introduction of IPPs must be urgently introduced”. Medupi and Kusile, the group says, are simply too expensive as well as too late.

Research prepared by Genesis Analytics on behalf of the Chemical and Allied Industries Association points out that in its application Eskom first determined its funding requirement to continue its business and to complete its building programme—and then set about justifying the escalation in tariffs.

This is tantamount to Eskom “determining how much money it needs and then finding ways to justify it”, argues Genesis Analytics partner James Hodge.

The Genesis research suggests that a 25% increase is a much fairer figure. It says there is scope for further reductions if certain cost items are scrutinised more closely.

It finds that the planned capacity outlined in the hastily gazetted Integrated Resource Plan may be excessive once South Africa passes beyond the riskiest, most power-constrained period—the years up until 2012.

This, it says, suggests that work on Kusile can be delayed, if not halted entirely, and that Eskom’s funding shortfall could be eliminated if Kusile is shelved.

But, like the EUIG, the Genesis report argues that South Africa cannot solve its power problems without letting IPPs enter the electricity sector. And, again like the EUIG, it posits the option of selling off assets such as older power stations in their entirety, rather than a share in Kusile, for example, as a way to attract investors.

Nersa “cannot police Eskom”, as Peet du Plooy of the WWF environmental organisation notes, but it can demand that the utility prove itself a technically and economically efficient licensee.

The ANC will no doubt have something to say about the country’s future power mix—not least because of its valuable stake in both Medupi and Kusile through its investment arm, Chancellor House.

Despite a painfully clear conflict of interest, Gwede Mantashe is unapologetic about Chancellor House’s standing empowerment deal with Hitachi Power Africa, which will supply boilers to both stations.

Several heavyweights, including Cosatu, the South African Communist party and the Treatment Action Campaign, have declared their lack of faith in Nersa. “We — believe that Nersa has long ago taken a decision on this matter to grant Eskom its 35% increase and these public hearings are meant to just comply with the law,” they say in a joint statement issued on Wednesday.

But while South Africans may have lost faith in Eskom, and even Nersa, they should not lose faith in themselves—their lights upstairs are very clearly on.

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