Cape Town – Eskom hopes to see significant system improvement by September 2021, after resuming its long-term maintenance programme in July, CEO Andre de Ruyter said on Thursday.
“I am pleased to inform you that our long-term reliability maintenance activities have been in full effect from 1 July 2020 and we are confident that we can expect to see significant improvement in the system by September 2021,” De Ruyter said in a keynote address to the Joburg Indaba.
He told delegates at the mining industry gathering that the Covid-19 lockdown had resulted in a drop in sales of seven percent in the period to August, and that this was expected to stabilise at a decrease of about five percent by year’s end.
“By year end this is expected to reduce to five percent due to the relaxing of the lockdown levels and the re-opening of the economy.”
Similarly, the company’s expenditure was down about seven percent as a result of lower production volumes and slower maintenance, but by the end of the year, this figure was expected to be around two percent.
De Ruyter defended Eskom’s demand for higher tariffs, citing a 2016 World Bank analysis of 39 countries in sub-Saharan Africa, which showed that South Africa’s electricity prices were the third lowest in the region.
He said the average price of electricity for consumers was 133 cents per kilowatt.
When compared to Eskom’s average price of 102 c/kWh, this translated into a R67 billion revenue shortfall for the utility for the 2020 financial year and over R300 billion in revenue shortfall over the last 10 years.
“The annual revenue gap of R60 billion exceeds Eskom’s annual cost for operating, maintenance, and employee benefits. This situation does not augur well for the sustainability of Eskom.”
To this De Ruyter added a warning that resorting to emergency power measures when the system failed, in the end cost more than the cost-reflective tariffs for which the utility was pushing.
“Bear in mind that back-up power is much more expensive that grid power, even at cost-reflective levels. The cost of unreliable electricity is much higher than appropriately priced electricity!”
Referring to the ongoing legal battle between Eskom and the National Energy Regulator of South Africa (NERSA) he said it was regrettable but there was no other option.
“Unfortunately, this has been the only course of action available to a licensed entity in reviewing a revenue decision. Eskom does not want to be in court with its regulator, and looks forward to the appropriate legislative changes to allow for a less adversarial approach to resolving our differences.”
The company, which now has debt of R488 billion (US$29.3 billion), recognised that it had a duty to manage its finances properly as it appealed to consumers to accept cost-reflective rates.
We therefore don’t ask for tariffs to subsidise our inefficiencies – we ask for tariffs that reflect reasonably incurred costs.”
NERSA has won leave to appeal a July high court decision that allowed the state utility to recoup R69 billion (US$3.9 billion) from consumers over the next three years via higher electricity tariffs.
The July ruling was a win for Eskom which was disputing a decision by NERSA to deduct a R69 billion equity injection from the the government in determining tariffs the company could effect for the 2019/20, 2020/21 and 2021/22 financial years.