‘Dire’ power tariff hike forces Eskom to delay cost efficiencies, lay off staff

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BR_BR ESKOM0~1 Associated Press Lethabo near Sasolburg took 10 years to build and was operational by December 1990. Eskom has had to delay some of its projects. Photo: AP

Johannesburg - The fact that Eskom had been granted half the tariff hike it had anticipated had had a “dire” impact on the power utility, as it had been forced to delay projects and lay off some staff, a senior company official said yesterday.

Projects that could be delayed without affecting Eskom’s quality of supply, such as automation of certain processes to improve cost efficiency, had been put on the back burner, Mongezi Ntsokolo, Eskom’s transmission executive, said at African Utility Week in Cape Town.

“We have very strong programmes [to] aggressively reduce our costs. We are looking at productivity. We’ve reduced manpower numbers within the organisation,” Ntsokolo said.

“We’ve had to look at our capital programme in terms of infrastructure development and delay some of the projects because we just cannot fund them.”

He said “a list of projects” had been delayed.

Despite the constrained budget, Eskom had taken a stand that it would not delay safety and security programmes needed to prevent plant breakdowns.

Last year the National Energy Regulator of SA (Nersa) approved an 8 percent annual tariff increase for the next five years, whereas Eskom had applied for increases of 16 percent. Even though this had affected the utility’s planning, Ntsokolo said Eskom had not applied to reopen the tariff determination process.

Reports surfaced last week that Nersa’s electricity sub-committee planned to approve a recommendation to give Eskom an interim tariff increase. But Ntsokolo said the only outstanding Eskom application was that for the regulatory clearing account for the second multi-year price determination period.

Moving to the security of power supply, Ntsokolo said Eskom wanted to secure hydropower from a number of independent power producers (IPPs) that were constructing hydroelectric plants along the Zambezi River, as well as in the Democratic Republic of Congo (DRC).

Frans Vreeswijk, the chief executive of the International Electrotechnical Commission, said the DRC had enough water energy resources to power the whole continent.

“Eskom has expressed an interest in getting some of that power… We are working with the host utilities,” Ntsokolo said.

He said Eskom had decided to partner with the host countries on these projects and then take part of the power generated.

He said Eskom would consider how much it had to put in, the price at which it could import that electricity, as well as the risk of not getting the contracted power to South Africa.

“If the price is good, we can buy cheap [hydropower] and then reduce our own more expensive generation,” he said.

On the question of risk, Ntsokolo said Eskom would not want to buy a large percentage of its supply from cross-border IPPs. “You want to buy enough to manage your own risks.”

Ntsokolo said a pilot project for integrating the sub-Saharan African grid had begun with the southern African power pool. - Business Report


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