Tag: Eskom

Eskom moves to dispose of non-core properties

By Sibahle Motha for Jacaranda FM

Power utility Eskom has confirmed that it will finalise the sale of Die Wilge flats at the Kusile power station during the first half of the year (pictured).

Construction work at the flats began in 2008 at a budget of R160-million.

However, costs ballooned to more than R800-million by 2019 with the project now being abandoned and incomplete.

Eskom says the sale of Die Wilge and other properties form part of the power utility’s disposal of non-core immovable property.

The power utility has since managed to sell two high rise offices in Kimberley and Johannesburg, raising a total of R76.1-million.

Eskom says it aims to raise more than R2-billion from the sale of non-core property.

Oracle threatens Eskom over R400m bill

By Roxanne Henderson for Bloomberg

Eskom Holdings has taken steps to protect its operations from disruptions after a contractual dispute with Oracle Corp.’s South African unit put its technical support services at risk.

The state power utility confirmed on Monday that it’s involved in the disagreement in which Oracle initially claimed Eskom underpaid it by about 7.3 billion rand ($500 million). While the amount was later reduced between the parties, Oracle rejected Eskom’s settlement offer of 166 million rand and threatened to terminate its services, the power utility said in an emailed statement.

Eskom has “assessed the risks in the event of Oracle withdrawing” its services and put interim processes in place “to reduce the risks of its operations being disrupted”, it said.

Eskom approached a South African court to compel Oracle to continue its technical support services until April 2022 but its application was dismissed last week, it said. It intends to seek leave to appeal.

Debt-laden Eskom is already under pressure from creditors and has struggled for years to provide reliable power, leading to disruptions that ripple through Africa’s most industrialised economy.

Eskom’s power grid is in deep trouble

By Jamie McKane for MyBroadband

Eskom has provided a detailed explanation of how its low energy availability will result in an increased risk of load-shedding this year.

A recent report published by the Council for Scientific and Industrial Research (CSIR) found that Eskom’s low Energy Availability Factor (EAF) was a driving force for the record-breaking load-shedding last year.

“Eskom fleet EAF is on a declining trend and drove load-shedding events in 2020,” the CSIR noted.

EAF measures plant availability including planned maintenance, unplanned breakdowns, and energy losses not under plant management control.

The statistics reveal that load-shedding occurred for 859 hours of 2020 (9.8%) despite a reduction in demand during the national COVID-19 lockdown.

This is bad news for 2021, as Eskom’s EAF has continued to drop into 2021, which will likely result in increased load-shedding until this improves.

According to Eskom’s latest weekly generation availability report, the average EAF for the year to date is only 58.55%.

In response to questions from MyBroadband regarding the effect of its declining EAF on load-shedding, the power utility said that lower EAF figures increase the risk of load-shedding.

“It is correct that as EAF drops, all other factors remaining the same, the risk of load shedding would increase,” Eskom told MyBroadband.

Falling energy availability means more load-shedding
Eskom said that its power system was currently constrained, a state partly due to the low EAF of the generating fleet. Load-shedding is subsequently required to correct this supply/demand imbalance.

The power utility also said, however, that EAF was only one half of the equation – the other being the demand it needs to meet.

“The dispatchable generation is required to meet the residual demand,” Eskom said.

“This residual demand is the total customer demand of the country less the power supplied by the renewable generation (wind generation, solar generation, concentrating solar power generation, biomass generation etc.) ”

“The residual demand is, therefore, made up of customer demand and the contribution from the renewable generation,” it said.

Each of these factors is variable, and the variance determines the strain on the system and the risk of load-shedding.

“In the case of the renewable generation, the contribution is dependent on wind and solar radiation and there is a strong seasonal effect on the wind generation,” Eskom said.

“The customer demand is also variable changing in the range of 22GW to 34GW over the year with higher demand during the winter months.”

“In general, lower EAF combined with high residual demand will result in load-shedding. Load-shedding is also unfortunately required when the fleet availability drops even further from the average availability for more than a few days.”

Eskom added that it is the generally low EAF coupled with the unreliability and unpredictability of the plant that results in load-shedding.

“All factors must improve to significantly reduce the risk of load-shedding,” it said.

Why EAF is falling
Eskom’s EAF is continuing to decline due to a number of factors, the most prominent of which is power plant failures and breakdowns.

“The major contributors to unplanned energy losses (UCLF) are partial load losses (where units are unable to operate at full load), boiler tube leaks, trips, outage slip and other full load losses,” Eskom said.

It should, however, be noted that Eskom is also conducting reliability maintenance on its power plants, which means that a portion of its fleet is taken offline for extended periods to resolve major issues and defects.

Once this program is complete, Eskom said it expects the risk of load-shedding to decline somewhat. However, while EAF may improve, the power utility still faces a significant capacity shortfall for the next five years.

“Eskom’s generating fleet is unreliable and unpredictable,” Eskom said.

“Together with focussed attention on the areas that contribute most significantly to load losses, Eskom has been embarking on a programme of increased much-needed reliability maintenance.”

“Only once that programme has been completed can we expect the plant performance to become more reliable and less unpredictable,” it said.

Eskom granted 15% tariff hike

Source: MyBroadband

Eskom will increase electricity tariffs by 15.63% on 1 April 2021, following an agreement reached with the National Energy Regulator of South Africa (Nersa) for the 2021/2022 financial year.

The settlement was confirmed in a court order handed down by Justice Joseph Raulinga on 15 February.

Raulinga had in January 2021 heard Eskom’s application to have an earlier High Court order allowing the increases executed, pending Nersa’s appeal of the matter in the Supreme Court of Appeal.

The High Court in 2020 found that the power utility should recover R69-billion in a phased manner over a three-year period.

Nersa had reportedly negotiated with Eskom and reached a settlement of R10-billion to mitigate the risk of the court ordering a R23-billion addition, the amount the High Court had originally found Eskom was entitled to for the next financial year.

This would have resulted in an increase of 21%.

The new court order stated that “an amount of 5.44c/kWh will be added to the average standard tariff for Eskom customers in the 2021/22 tariff year making the aggregate standard tariff for Eskom customers in the 2021/22 tariff year 134.30c/kWh”.

Phased tariff increases
News of the increase comes a day after Eskom CEO André de Ruyter said the utility was working with Nersa to ensure its planned tariff increases don’t come as shock to customers.

These comments came during a recent episode of FMF’s The Free Marketeers web series, during which De Ruyter elaborated more on Eskom’s plans to reduce load-shedding, increase its operational reliability, and improve finances.

He maintained cost-reflective tariffs were required to address Eskom’s revenue shortfall, as the quantum of electricity Eskom sold had for a fairly long time remained flat, which Eskom attributed to a lack of growth in the economy.

According to benchmarking that the utility had done internationally “on a number of fronts”, it was absolutely convinced that Eskom’s electricity price was below the norm.

De Ruyter said Eskom was making good progress in negotiations with Nersa for price increases.

“We will be able, I believe, to address the electricity tariff increase issue in a way that does not cause a price shock to the economy,” De Ruyter said.

“We are at idem [in agreement] with Nersa that what we want to avoid is a sudden large increase in the cost of electricity that causes distress to households and businesses.

“What we are going to try and do within the confines of the regulatory system is to have a phased approach to this,” he added.

De Ruyter emphasised that the amounts on the bill that a business or homeowner would get differed from Eskom’s actual electricity selling price. These bills would include the additional charges that municipalities or other distribution authorities charged.

He submitted that those charges would in instances vary from justifiable, to very high, and above the norm.

 

By Siphelele Dludla for IOL

Eskom has proposed taking over debt laden municipalities as it tries a different approach in recouping around R36-billion in debt arrears that continue to weigh down on its balance sheet.

Chief executive Andre de Ruyter yesterday said the utility was piloting an “active partnering” model where it would over the running of struggling municipalities, like it did with Malutia-Phofung Local Municipality in the Free State.

De Ruyter said non-paying municipalities were a “major problem” to Eskom’s financial sustainability, adding that 70 percent of the arrears debt was owed only by 10 councils.

He said that Eskom had applied a variety of measures to recoup the debt, including the so-called nominated maximum demand and attaching bank accounts and movable assets, but all these efforts had come to nought.

“We are implementing something that we call active partnering. We have tried many levers to persuade municipalities to pay,” De Ruyter said.

“But the model that we think is going to work best is something that we are currently trialing with Malutia-Phofung.”

In July last year, Eskom attached the bank account of Maluti-a-Phofung following a court order granted in 2018 as of its revenue recovery strategy.

Eskom said this was a result of the repeated failures by the municipality to adhere to its payment obligations for the bulk supply of electricity.

De Ruyter said Eskom would step in and acts as the agent for the municipality by maintaining the infrastructure such as substations while assisting with billing and false prepaid metres.

Eskom would also collect revenue on behalf of the municipality and then pays it to its bank account.

“With that part of the revenue into Eskom’s bank account we can assure that the current account is serviced on a regular basis,” De Ruyter said.

“And if you prevent further build up of incremental municipal debt, that’s a very good start towards addressing the debt problem.

“So we certainly think that this active partnering concept is far more a constructive and an appropriate way of engaging with our customers and ensuring that we get paid, and that service delivery can be addressed.”

De Ruyter said there was still a substantial ramp of legacy debt that needed to be addressed.

He said building a financially self-sustainable Eskom was part of his top three priorities.

Though Eskom’s staff costs had come down after 2 000 workers left the power utility last year, De Ruyter said the debt burden was still at unsustainable levels.

“We are currently labouring under an unsustainable net debt burden that varies between R460bn to R485bn, depending on the exchange rate,” he said.

De Ruyter also said that Eskom was not opposed to self-generation for domestic purposes without a license.

President Cyril Ramaphosa last week said the government will begin amending the law to allow for self-generation of between 1MW and 50MW to ease the burden on Eskom.

“There is a narrative that Eskom is opposed to rooftop solar generation, that’s not true,” De Ruyter said.

 

By Jamie McKane for MyBroadband

Eskom’s proposed electricity tariff changes could see the electricity bill of average South Africans skyrocket, according to energy expert Ted Blom.

Eskom itself has rebutted these projections, however, stating that while certain customers may pay more and others less, the change will not lead to an increase in its revenue.

The power utility plans to reduce the electricity tariff for the peak winter months and hike tariffs for electricity usage during its summer period.

It has also said it wants to replace the inclining block rate tariff system with a new system that charges fixed network costs regardless of usage and separate electricity usage costs.

The inclining block rate system currently means that South African households that use more electricity pay more per kWh than those which use a lower amount of electricity every month.

Removing this would mean that all households would pay the same per kWh of electricity usage, regardless of how much they use each month.

Potential for massive bill shock – Ted Blom
Eskom has said these proposed tariff changes are being implemented to bring the prices consumers pay for electricity in line with the efficient cost of producing power.

Blom, however, has warned that those who do not use much electricity every month may see a significant increase in their monthly electricity bill.

This is because while Eskom has said it will reduce winter tariffs, it only charges these tariffs for three months of the year. During the rest of the year, it charges summer season tariffs, which it has said it plans to hike.

Blom says that depending on how much these tariffs are altered, this may result in a net increase in consumer electricity bills per year.

Additionally, the introduction of a fixed network cost could see those who use relatively little electricity paying much more than they currently do, Blom said.

This is because they will be required to pay fixed monthly costs for being connected to the electricity grid, and this charge will be incurred no matter how much they try to save on electricity usage.

These changes will be most felt by households that use electricity sparingly, Blom said.

Speaking to eNCA, Blom said households that cannot afford to buy a lot of electricity will face a heavy burden if Eskom goes through with these changes.

“Eskom hasn’t provided the exact breakdown, but as an example – on the first 300kWh of electricity, where you used to pay R1.29 you could now pay closer to R2, and that will double the average person’s electricity bill,” he said.

Some customers might pay more or less – Eskom
Speaking to eNCA following Blom’s statements, Eskom electricity pricing specialist Shirley Salvodi said that the changes to the summer and winter tariffs would be revenue-neutral for Eskom.

“The sum of all the changes we are making equals the Nersa-approved revenue requirements,” Salvodi said. “So by slightly reducing the winter rates and increasing the rates for the nine months in the summer, the sum of the two changes is revenue-neutral for Eskom.”

“But some customers might pay more or less, depending on their profile.”

Regarding the inclining block rate tariff changes, Salvodi argued that the projection that some customers will pay double is not strictly correct.

“The statement made that some customers are going to pay double is a bit misleading,” she said. “There are many customers that are actually going to see benefits from the changes we are proposing.”

In response to questions from MyBroadband, Eskom spokesperson Sikonathi Mantshantsha elaborated on Salvodi’s previous statements.

“The proposed change to our tariffs structure, reducing the three winter months and increasing the nine summer months, is calculated in such a way that the same amount of revenue will be received by Eskom,” he said.

“Eskom will not be earning any additional revenue from this change, and all of the changes must be approved by regulator NERSA.”

Removing the inclining block tariffs and the reasons are clearly spelt out in the power utility’s submission, Mantshantsha said.

“I encourage customers and Mr Ted Blom to read the document, understand the numbers and use the models Eskom has provided on our website.”

Mantshantsha added that customers who do not use a lot of electricity will not be required to pay these fixed charges.

“A point to note is that Eskom is not proposing to introduce fixed charges for low consumption customers, so there is always this tariff option available for these customers,” he said.

Brace for Stage 8 loadshedding, says expert

Power and mining expert Ted Blom has warned South Africans that they should brace themselves for the worst year of loadshedding yet in 2021, with Stage 8 being a possibility before the end of winter.

In the latest episode of the Free Marketeers podcast, Blom provided his analysis of the utility’s situation and a prognosis for loadshedding in the next year.

The highlights of Blom’s predictions include:

  • Eskom is understating the amount of power it was actually shedding from the national grid
  • Eskom already interrupts 2 000MW of supply to its big customers when it announces load-shedding for the general public (so Stage 1 load-shedding or shedding 1 000MW is in fact a 3,000MW shortage)
  • Eskom is capable of handling about 11 000MW of shortages before having to implement load-shedding
  • The utility’s outlook for the next three months in its latest system status report showed a near-consistent unavailability of 20,000MW or more when taking both planned maintenance work and unplanned outages into account
  • The deficit over the next three months would hover around 9 000MW
  • Based on Eskom’s own forecasts, 2021 is going to be the worst year of load-shedding on record

What happens during Stage 8?

Stage 8 load-shedding is implemented when 8 000MW needs to be shed from the national grid in order to prevent a total collapse of the system.

During stage 8, consumers can expect much more frequent power cuts, to be without electricity for 48 hours over four days, or 50% of the time.

The worst level of load-shedding previously experienced in South Africa was Stage 6, which was implemented in December 2019 after a technical problem at Medupi Power Station.

At the time, Eskom needed to shed 6 000MW, which meant that around 40% of its capacity had been unavailable.

Response

Eskom’s response to the outlook was that “while it endeavours to only load shed at Stage 4 or below and only when truly necessary, higher stages of load shedding could be required”.

Source: Supermarket & Retailer

Johannesburg and Cape Town, which have a combined population of about 10 million people, plan to diversify away from the electricity produced mainly from coal by Eskom Holdings SOC Ltd to more sustainable sources such as solar and power generated from landfill gas.

“The City is looking at 300 megawatts of renewable” energy, Kadri Nassiep, Cape Town’s executive director for energy and climate change, said by email. “If all clarity is obtained and plans forge ahead, we could start seeing greater diversification of our energy resources as a city in about three to five years time.”

In addition to improving security of supply, the move will allow the cities to boost their fight against climate change by using power that doesn’t result in the emission of greenhouse gases. Still, it will slash revenue for Eskom, which is struggling to service a $30 billion debt bill.

“Internationally many cities are at the forefront of dealing with climate-change disasters and so have adopted proactive climate-change responses,” Lauren Hermanus, director of Adapt, a South African company that provides consultancy services on sustainable energy, said in an interview.

“We are also all aware of Eskom’s related operational, governance and fiscal challenges, most clear in our bouts of load shedding,” she said, using a local term for power outages.

Landfill gas

South Africa produces the same quantity of greenhouse gases as the UK, which has an economy eight times larger. Eskom, which runs a fleet of coal-fired power plants, is the country’s worst polluter, accounting for about 40% of the greenhouse-gas emissions.

Cape Town plans to build a photovoltaic solar power plant by the end of the 2023 financial year, as well as sourcing additional sustainable energy, Nassiep said. The city took the energy ministry to court this year to win the right to source its own power. The judge ruled that further negotiations with the government should take place.

“We intend putting out a tender for renewable-energy plants embedded in our grid in the next year and we would like to source renewable energy from large independent power producers as soon as is feasible,” he said.

Johannesburg, South Africa’s biggest city and financial hub, is considering sourcing power from solar plants and landfills, where gas from rotting garbage can be used to produce electricity.

The initiative is driven mainly by Eskom’s unreliability, the city’s commitment to reduce carbon emissions and the need to protect customers from rising power prices, said Isaac Mangena, a spokesman for Johannesburg’s City Power utility.

“City Power is still at early stages of the initiative and we expect the process to take at least 2 years,” he said.

Consumers lose again in Eskom-NERSA clash

Source: OUTA 

Eskom’s urgent application filed recently to recover one of the R23bn bailouts in 2021 is understandable but it is harsh news for struggling consumers and businesses.

There is no way to win in this situation.

It’s the latest move in the legal battles between the inept regulator, NERSA, and the utility struggling with unsustainable debt.

In July 2020, the high court ruled that NERSA was wrong to consider the R69bn government bailout to Eskom (R23bn a year for Eskom’s 2019/20, 2020/21 and 2021/22 financial years) as revenue instead of as an equity injection, and that this resulted in a significantly lower Eskom electricity price increase allowed for these years. The court ordered this to be added back to the electricity price.

We note that NERSA conceded and acknowledged that it erred in this regard in the court proceedings leading up to the judgment against it. We further note that the judge ordered the error be rectified through appropriate tariff increases during the 2021/22, 2022/23 and 2023/24 financial years.

NERSA was subsequently granted leave to appeal, not in respect of its self-acknowledged error, but to challenge the judge’s authority to prescribe the manner and timing of electricity price increases to rectify NERSA’s mistake. NERSA believes it should have the right to decide how much the prices should increase and over what period in refunding Eskom, taking into account the effect on customers and the economy. NERSA’s appeal – which is still pending – effectively suspended the court order.

Eskom’s interdict this week calls for R23bn – one year’s bailout – to be loaded onto the 2021 price (the allowable revenue), so that it does not lose another year of this. It will add about 10% to the price increase from April 2021, in addition to the 5.22% already granted. In terms of the court order, it will increase the price from the already approved 116.72c/kWh to 128.24c/kWh.

OUTA believes that NERSA has demonstrated a serious lack of competence and judgment in its misappropriation of R69bn as revenue instead of equity in making the Multi-Year Price Determination (MYPD) for the 2019/20, 2020/21 and 2021/22 financial years. While this has a negative impact of Eskom’s cash flow and sustainability, we also believe that the application of Eskom’s tariff increases following the court’s ruling in their favour will be a blow to an already over-burdened South African consumer and the economy as a whole.

The past decade of NERSA’s lack of leadership and political meddling has failed to hold Eskom’s past leadership to account for the utility’s soaring costs, borrowings and false asset revaluations. This is now playing out in very technical and costly court challenges that are having negative consequences on both Eskom and the public at large.

OUTA believes that NERSA may be wasting more time by opposing Eskom’s interdict to have one of the three R23bn bailouts loaded onto the 2021 price, as this may lead to more bailout requests from Eskom to prevent it defaulting on its loans.

Eskom effectively lost the R23bn a year for 2019/20 and 2020/21, due to NERSA’s ruling. OUTA believes this ship has sailed and that this situation provides NERSA and Eskom with an opportunity to reach a compromise on writing off at least part of the outstanding R46bn, in a way that takes into account the interests of Eskom, customers, taxpayers and the economy.

Eskom workers strike

By Lauren Isaacs for EWN

Eskom on Monday confirmed that some workers at its power stations would embark on a planned protest from Tuesday.

The demonstrators are temporary workers employed by contractors and Eskom Rotek Industries.

It is believed they are up in arms over the use of labour brokers.

Eskom’s spokesperson Sikonathi Mantshantsha said: “Eskom has put in measures to minimise the disruption to production and it bears noting that the matters that are being raised by the protestors are already before the CCMA,” he said.

On Tuesday night Eskom sent a notification on Twitter to say that the power grid was under pressure.

This comes as President Cyril Ramaphosa said that government was making progress in overcoming the problems Eskom has been facing for years now.

Ramaphosa has used his weekly newsletter to address the energy crisis gripping the country.

He said that improvements were continuing in municipal debt collection and despite load shedding, maintenance work was continuing at power stations.

He said that South Africa would be buying electricity through a transparent tendering process that prioritised competitiveness and cost-effectiveness.

Government has gazetted ministerial determinations that will enable the development of more than 11,800 megawatts of additional power generation.

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