Public Enterprises Minister Lynne Brown. File photo: GCIS
Public Enterprises Minister Lynne Brown. File photo: GCIS

Eskom bungles R35m deal

By Craig Dodds Time of article published Oct 12, 2014

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Johannesburg - Even as it struggles to keep the lights on, amid warnings that the electricity supply will be tight for years to come, Eskom has to pay at least R35 million for energy it contracted to buy from an independent producer it failed to connect to the grid.

This is just one example of poor planning that has stranded independent producers who bid for projects under the Renewable Energy Independent Power Producer Procurement Programme – their plants are ready to fire but not connected to the grid.

Eskom told Parliament recently it was running into trouble with the financial closure of projects in the third bid window under the renewable programme because it would not be able to expand the grid in time to match the expected completion of these projects.

This will delay the renewable energy programme – under which South Africa plans to procure 3 725MW – until Eskom is able to catch up with grid expansion plans, at a time when it is struggling to maintain its own plants because it has to keep them running at full capacity just to keep the lights on.

Responding in writing to a parliamentary question from Cope’s Deirdre Carter on Friday, Public Enterprises Minister Lynne Brown said there were a number of instances where Eskom had not taken up the supply of electricity from independent producers because funding constraints had held back completion of network strengthening and grid connections.

“Eskom, as the buyer of electricity under these power purchase agreements, has an obligation to make deemed energy payments if, among other reasons, the network provider (Eskom or a municipality) has delayed the grid connection beyond the contractual grid connection date,” Brown said.

One 5MW solar photovoltaic project fell into this category and was expected to be delayed by a year, at an energy cost of R35m.

Eskom has blamed the lower-than-requested multi-year price determination granted by the national energy regulator for an expected R225 billion revenue shortfall over the three-year period.

But experts have said huge cost overruns and delays in the construction of its two coal-fired power stations, Kusile and Medupi, have contributed to the financial crisis.

DA spokesman on energy Lance Greyling said on Saturday Brown’s reply pointed to a number of other problems.

It was now doubling the cost estimates it had given independent producers to connect them to the grid – throwing out their business model and the prices they had quoted for electricity in their bids.

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Sunday Independent

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