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Learn to live with load shedding, says Eskom

| Economic factors

SA MUST learn to live with recurrent electricity cuts for the next three years as Eskom grapples with the twin problems of building new capacity while playing catch-up with the maintenance of its old, neglected power stations.

To fix the maintenance backlog will take about 10 years, the same time it took to accumulate.

Eskom CE Tshediso Matona said on Thursday that the company needed to build at least 5,000MW of new capacity before it could reliably supply power again and restore its spare generation capacity to appropriate levels.

"The question is not whether load shedding will be part of our lives, but it is how we cope with it. Eskom is not able to guarantee reliable supply on its own," Mr Matona said.

By June, Eskom will add 800MW of generating capacity when the first unit of the coal-fired Medupi power station under construction in Limpopo reaches full production. Medupi will start producing its first power six weeks from now, gradually rising to full capacity within six months.

In another setback to its capacity investment programme, Eskom has now pushed back the synchronisation of the first unit of the Kusile power station, which is under construction outside Emalahleni, in Mpumalanga.

Whereas the 4,800MW coal-powered station was scheduled to start producing power by the end of this year, its first 800MW unit will now start delivering only in the first half of 2017.

As Eskom’s older stations trip unexpectedly and frequently, any slight delay in commissioning the new projects puts the country at risk of load shedding.

The utility is operating with 11,500MW, nearly a third of its generating units’ installed capacity, unavailable due to such unplanned breakdowns. The international norm is to have up to 15% of installed capacity available to meet extra demand.

The major cause of the frequent breakdowns was Eskom’s decision in about 2008 to defer routine maintenance of power stations and keep the lights on for the Soccer World Cup, held two years later. "Eskom has not stayed faithful to the maintenance regime and that’s the real problem we’re having," said Mr Matona.

The country had to make difficult choices back then, and chose not to have load shedding during the tournament, Eskom chairman Zola Tsotsi said. "Had we had load shedding during the World Cup, SA would be a very different country today."

Due to the National Energy Regulator of SA (Nersa) granting Eskom lower electricity price increases than it applied for, Eskom has faced a cash crunch to maintain the power stations.

As a result, it had "all but exhausted the reserve margin and is now vulnerable", said Mr Matona, and "load shedding is going to be part of our lives, the power system will be severely constrained for a long time".

Asked what a long time was, he said three years was needed to restore the generating assets to regular, routine maintenance.

That would help limit the number of equipment breakdowns that have frequently plunged the country into controlled blackouts.

"Our problem has accumulated over a long period and it will not be reversed overnight. We will probably need the same amount of time to overcome it."

The equipment breakdowns mean Eskom is forced to sell less and less electricity, eroding its revenue base, and needs more financial assistance from the government to cover its costs.

Mr Matona said the utility was still waiting for the R20bn that Finance Minister Nhlanhla Nene promised in October as part of its recapitalisation.

Eskom had requested a "capital injection of at least R50bn". The government said it would sell as yet unnamed "noncore assets" to raise the R20bn for Eskom. For the rest, the electricity provider must approach capital markets.

In addition to the promised R20bn, Eskom has asked for R3bn to enable it to buy diesel to power its emergency open-cycle gas turbines.

"On the financial side, there is interaction between our operational challenges and liquidity," Mr Matona said. "Because of the loss of capacity at Majuba power station, we have had to use more diesel. But this is not the only factor. Our electricity sales have reduced and debt has increased because of cost overruns on the new build programme."

Eskom has indicated it will apply to Nersa for additional tariff increases to raise enough revenue to cover its costs.

Whereas it applied for a tariff increase of 16% for each of the five years to April 2018, Nersa approved only half that rate.

"Fundamentally, our financial health depends on getting the right tariff, since we cannot recover on our costs of production," said Mr Matona.

The company can apply for a revision only after the first two years, which end this April.

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