Eskom: loadshedding solutions, maintenance & IPP budget, organised labour allegations

Meeting report

Chairpersons’ opening remarks

Co-Chairperson Magaxa welcomed the Members of the Committees, the delegation from Eskom, and the media houses present in the meeting. He said the meeting was a continuation of an engagement between the Committees and Eskom a week and a half ago [during an oversight visit], which had ended when the Eskom CEO had to depart early to another meeting. The Committees had managed to interact with the organised labour organisations within Eskom, including Solidarity, the National Union of Mineworkers (NUM) and the National Union of Metalworkers of South Africa (NUMSA). Some of the key issues that the Committees requested from Eskom included immediate to medium term solutions to load-shedding, budgets for maintenance of coal plants versus Independent Power Producers (IPPs), and responses to allegations made by organised labour.

Co-Chairperson Mkiva said the Committees had emphasised in the previous meeting that they would not expect a cut-and-paste presentation of what had been said before, but they wanted the presentation to focus on the matters that critically affected the nation so that a way to deal with the problems could be found without negating the medium and long-term view of finding a permanent solution.

“We cannot allow a crisis to preside over us, but as leadership at different levels, we must preside over the crisis, especially because we are not dealing with a national disaster,” he said. These were issues of deficiency, inefficiency and ineffectiveness in terms of managing a national asset that was supposed to bring light to the homes of citizens.

He said the Committees wanted a presentation that would provide a clear picture, mainstreaming the current and critical problems that the entity was dealing with, so that, as leaders, they could assist by executing their duties to try and help the nation to resolve the problem and turn around the situation at Eskom.

Co-Chairperson Luzipo appealed to the Members of the Committee’s to use their privilege of being public representatives effectively for the benefit of the people, and to focus on the real issues. He asked them to control their emotions during the meeting as they were dealing with a serious matter that needed solutions.

Mr G Cachalia (DA) extended apologies on behalf of Mr F Essack (DA), who could not attend the meeting due to the passing of his wife.

Co-Chairperson Magaxa noted the apology and expressed the Committees’ condolences to Mr Essack’s family.

Mr E Buthelezi (IFP) extended an apology for Mr J Bilankulu (ANC), who was sick and could not attend the meeting.

The apology was noted.

Eskom Board Chairperson’s opening remarks

Mr Mpho Makwana, Eskom Board Chairperson, said that arising from the previous discussion that was had at Megawatt Park, the Board had convened a meeting where they had engaged their colleague, Mr Clive le Roux (Chief Nuclear Officer at Eskom), regarding the utterances that he was said to have made. Even though he said he had not made those utterances, the Board had decided to have a sub-committee meeting to ensure that they investigated the matter. The Board had also felt it was important for them to give credibility to the process and ensure that an independent party supported that committee. One of their panel of legal advisors at Eskom would be assisting in the matter, and the Committees would be informed once the investigations were done.

He said the presentation was an outcome of a turnaround plan adopted by the Eskom Board on 10 December 2022, which was thereafter presented to the National Energy Crisis Committee (NECOM) of Ministers. The chairperson of the NECOM had engaged with the Eskom Board several times, and in late January, it was confirmed that the NECOM and the local governments that were involved were satisfied with the turnaround plan. Engagements through a stakeholder road show were commenced, which led to the subsequent acceptance of the plan.

Eskom presentation

Mr Andre de Ruyter, CEO of Eskom, presented Eskom’s immediate to medium-term solutions to load-shedding, the budget for the maintenance of coal plants versus IPPs, and responses to allegations made by organised labour. He said ending load-shedding required three levers, including Energy Availability Factor (EAF) recovery, additional capacity, and government enablers.

These were all medium to long-term levers, and Eskom’s generation recovery plan was a two-year plan.
In the short-term, the most viable solution to minimise load-shedding was to ensure that Eskom had the funds to run the open cycle gas turbines (OCGTs) at their maximum capability. This could save up to two levels of load-shedding. The expedited return of Kusile units 1, 2 and 3 could add over 2 100 megawatts to the grid. Current indications were that it would take at least a year, but an expedited solution was being investigated. This would, however, require a relaxation of minimum emission standards (MES) requirements, specifically due to bypassing the flue gas desulphurisation (FGD).

He said the plan to end loadshedding would require EAF recovery, additional capacity, and government enablers through improving Eskom’s plant performance, while urgently bringing additional capacity online. The generation’s operational recovery plan was geared towards improving the EAF from 57% to at least 70% from the end of the 2025 financial year and onwards. In the current financial year, Eskom would prioritise setting up for success by developing the enabling structures, including the implementation of turnaround plans and reliability maintenance, guarding performance and current flagship stations such as Medupi, Lethabo, Matimba and Peaking, as well as focusing on the top six priority stations -- Tutuka, Duvha, Majuba, Kusile, Matla and Kendal.

By the end of the 2024 financial year, Eskom aimed to ‘execute excellence’ by focusing on the next priority stations -- Kriel and Arnot -- successfully executing the extension of Koeberg 1, sustaining the excellent Medupi performance and embedding principles of operational excellence by addressing internal skills gaps. The entity also aimed to return Kusile 1, 2 and 3 and to synchronise Kusile 5. By the end of the 2025 financial year, Eskom aimed to reach world-class performance levels by achieving an EAF of 70% and above. During this time, the entity aimed to have Kusile fully operational and return Medupi 4 from long-term forced outage. It also aimed to have closed the old stations as per the approved dead-stop dates, and to focus on current and future skills by ensuring the successful implementation of the Koeberg 2 steam generator and long-term operating projects, as well as the commercial operation of Kusile 5.

He said that by recovering capacity and commissioning new build, 6 000 megawatts (MW) could be delivered by generation in the next 24 months. Eskom had regrouped its efforts to focus on improving people, plant and process performance, which was essential for the turnaround strategy. The strategy had ten focus areas, which were plant condition, inadequate capacity, skills and experience, fraud and corruption, policies and procedures, funding, environmental compliance, coal, new build defects and Eskom risk industries.

The successes achieved thus far included National Treasury relaxing some requirements, which would speed up procurement, and the allocation of outage budgeting had improved. They had seen signs of improved outage readiness. The entity was receiving a lot of collaboration among external stakeholders with a willingness to assist Eskom. On the nine-point plan, there had been success in the new build defect repair, as Medupi's performance was improving, the entity was achieving its coal stock days, and its rain readiness programme was in place. Additional focus on prioritising maintenance at the top six stations -- Duvha, Kendal, Kusile, Majuba, Matla and Tutuka -- had been initiated. These stations had been specifically selected, as they were amongst the highest contributors to unplanned load losses. Any improvement at these stations would result in massive gains in EAF for generation.

On the current plant status and forward view, he said they were experiencing very high levels of plant unreliability and forced outages. This was compounded by high planned maintenance. Several large generating units were off for extended periods, contributing to the higher plant unavailability and loss of generating capacity. Medupi 4, Kusile 1, 2 and 3, and Koeberg 1 had planned outages, and Kusile 5 had delayed commissioning. This necessitated the implementation of stage 4 load-shedding for the evening peak until at least Friday, to allow sufficient capacity to meet the demand and conserve reserves at the open cycle gas turbines (OCGTs) and pump storage.

On the budget for maintenance of coal plants versus IPPs, he said costs for renewable and OCGT IPPs were pass-through costs, and over/under recoveries were recovered through the Regulatory Clearance Authority (RCA) process. The use of Eskom OCGTs was restricted to a percentage load factor (3%), and any over-expenditure, except for price, was not allowed. The National Energy Regulator of South Africa (NERSA) would allow an adjustment at the average coal price for production above the restricted load factor.

Eskom did not use the maintenance budget to pay off debts. Maintenance costs were funded from cash from operations, and not from borrowings. The cash from operations for the 2022 financial year (FY) had been R53.4 billion, after allowing for maintenance costs of R19.1 billion, comprised of planned maintenance of R15.1 billion and unplanned maintenance of R4 billion.

Eskom used the spend incurred on all other line items other than its own employee benefits (EBs) when disclosing maintenance spend. Current reporting practice was that Eskom disclosed expensed value excluding EB costs. There was also a degree of maintenance spend that was capitalised, as allowed under international accounting practices, this was encountered across all divisions, however generation had the largest proportion of this under the general overhaul/outage program.

Eskom reported maintenance based on spend incurred by the company, quoting this value before accounting for internal group trade with subsidiaries. While this included spend with Eskom Rotek Industries (ERI), which would be eliminated in the group consolidation, the reality was that this spend would be incurred to the market should ERI not exist as a current subsidiary. This could create an impression that the reported maintenance value was higher than the “Opex” value disclosed for the Group in the annual financial statement (AFS).

Overall, Eskom's repair maintenance spend had grown/was forecast to grow at an annual average rate of 6.5% since FY 2020. Coal fleet repairs and maintenance annual growth rate averaged 4.7%. The reduction was linked to units and stations being closed in the period, and this must be kept in mind when comparing this to annual average growth rates in the balance of the generation (Gx) fleet, and the repair and maintenance (R&M) in the distribution (Dx)/transmission (Tx) divisions. For Gx, the 2035 strategy used to inform the forecast period showed 23 units being moved to a shutdown state. In the case of the non-Gx component, significant Tx grid and Dx network expansion being undertaken in the period added to the required R&M outlook.

Repairs and maintenance on the Gx coal plant hold constant over the forecast period because of the reduction in spend as units were moved to shutdown, which balance off against the underlying inflationary/material price increases that this was exposed to. The IPP spend grows over the period, in line with a deferred implementation perspective of the Integrated Resource Plan (IRP) 2019 programme timetable for the forecast period.

Mr de Ruyter addressed the allegations made by organised labour individually, responding to issues including mothballed power stations, the moving around of power station general managers, the matter of the correlation between the age of power plants and their performance, the focus on maintenance and reconnection of all shutdown units to stop the rolling blackouts, etc.

On the allegation that the internal forums at Eskom were dysfunctional due to no appetite from management to change, he said Eskom had a collective agreement -- a recognition agreement that regulated their relationship with trade unions. Amongst other things, the recognition agreement provided for participative structures wherein trade unions were engaged at various levels. In addition, the agreement provided for dispute-settling mechanisms in the event the parties were unable to resolve issues. It was ideal to resolve issues internally, but failure to do so did not indicate a dysfunctional relationship. Eskom accepted that the relationship could be improved, and this was the responsibility of both the employer and trade unions.

Eskom’s vertically integrated structure was appropriate at its inception, and had served the country well for over 90 years. This configuration was no longer suitable to meet the country’s energy needs and had made the business susceptible to the kind of problems it had recently experienced, including state capture. The restructuring of Eskom into three subsidiary businesses – generation, transmission and distribution – was necessary to reduce the risk that Eskom posed to the country through its dependence on fiscal allocations and inability to supply the economy with adequate power.

The Eskom that must emerge from these reforms had to be capable, transparent, accountable, competitive and world class. Government had a responsibility to mitigate the systemic risk that Eskom had become to the country. This would start by making the organisation responsible for how it allocates resources to its operational activities, and that it was answerable for its performance at all levels.

Co-Chairperson Mkiva appreciated the Eskom Board Chairperson’s response to the allegations against Mr Le Roux, noting that the steps taken by the Board were decisive enough to get to the bottom of the matter, and he hoped that Members would share the same sentiment.

Discussion

Mr E Buthelezi (IFP) wanted to know how much money Eskom needed to mitigate load-shedding. The CEO had mentioned that the municipalities owed Eskom about R57 billion, and he wanted to know if any government departments owed Eskom, and how much they owed. He also asked the CEO to provide details on how much the power acquired from other African countries cost versus how much Eskom charged them for the power it supplied.

He also asked the CEO to comment on the allegations that the entity was not incentivising its employees, and that some had not received incentives for over ten years. He did not understand what the CEO meant when he said Eskom was finding it difficult to impose consequence management because of bias, and asked for clarification on the matter. Lastly, having heard that IPPs were more expensive, was the public wrong to believe the allegations that the IPPs were meant to collapse Eskom to benefit private producers?

Ms P Madokwe (EFF) had an issue with the over-glorification of IPPs. She observed that around 2017 it had been mentioned that the introduction of IPPs would solve some of Eskom’s problems, but Eskom was now saying IPPs were costing them more, and Eskom was bound to contracts that could not be undone. What guarantees did the country have that the call for IPPs was really to address loadshedding, when the current IPPs were not helping? There were also reports that some of the contracts with IPPs were going to be reviewed. Which contracts were those and what was the progress in that regard? Did NERSA not have a cap to restrict the rand value of contracts Eskom could enter with IPPs?

There was also an issue raised that the maintenance model at Eskom involved outsourcing. Eskom had told the Committees about issues of sabotage from the contractors because they wanted more work. How did Eskom oversee the work of the outsourced contractors, and what guarantee did the public have that the entity was not putting itself in a vulnerable state by outsourcing services? This also spoke to the allegations made by the unions that there had been replacement of skilled workers by contractors at Eskom.

She also wanted to know whether it was true that South32, which was said to be one of Eskom’s highest electricity consumers, was paying much lower tariffs than the average household and that the agreement to pay the lower tariffs had been entered into while South Africa was facing load shedding. If this was the case, she wanted to know the reason for that agreement and whether the company, which used 9% of the energy supplied by Eskom, was also affected by loadshedding. Why was Eskom not considering unplugging the company, especially because a lot of South African businesses were affected by load-shedding and some of them had closed.

She said in the 2022 State of the Nation Address (SONA), the President had referred to an ice cream business that was started with a R350 COVID grant, and was interested to find out if the President would announce that the business had closed because of load-shedding at the SONA2023. She said there were reports in December that the Eskom CEO was under investigation concerning procurement irregularities at Eskom. What was the extent of that investigation, and how far was it, because it fell under the grid after the reports were released?

She did not understand how the theft of fuel amounting to about R100 million per month had happened, and how that could not be accounted for. What had been done by Eskom to prevent it from happening again? She felt that the matter was not being taken as seriously as it was supposed to be, and fingers were being pointed between Eskom and the police on who needed to investigate. Were any extensive measures taken to ensure that there were no future occurrences of fuel being stolen?

Ms J Mkhwanazi (ANC) asked what could be done currently to end load-shedding without facing long term challenges, and whether Eskom had involved every stakeholder that was important in trying to find a solution to the problem. Regarding the non-payment of municipal accounts, had Eskom engaged with the Department of Cooperative Governance and Traditional Affairs (COGTA) and the South African Local Government Association (SALGA), so that both institutions could understand the severity of the situation at hand and their involvement in it so that they could work together to find solutions? Had Eskom dealt with issues relating to illegal connections and the theft of cables, and how much impact did those have on the current loadshedding?

She also wanted to know whether Eskom monitored and supervised contracts with service providers to ensure that every service they paid for was executed correctly. Among the ten focus areas mentioned in the presentation, the CEO referred to state development on human capital skills. She wanted to know how far Eskom’s technical academy would assist in dealing with contingent debt. She also wanted to know what Eskom’s motivation to apply for the electricity price increment to NERSA had been, considering the economic situation of the country.

She had observed that there was no proper forum of engagement between the Eskom executive and the unions in the last two meetings, because if there was, most of the issues and misunderstandings would have been resolved. She challenged the Board to look at the issue and try to establish a better engagement forum between the executive and the unions so that issues could be dealt with more effectively going forward.

Ms C Phiri (ANC) said Eskom had said they needed funds to procure more diesel to end loadshedding, and asked them if they could end load-shedding without long term challenges if they were immediately allocated the funds for the diesel they needed. She said the country did not need quick-fix solutions only for them to result in long term challenges. Eskom had mentioned a few power stations that had been shut down for maintenance that would take about 18 months to recover. In her understanding, as a person who was not a scientist or technician, this meant that those units could be turned on and they would generate power that would be useful for the nation in the current crisis. She wanted to understand the reasons for the shutdown of the units, barring the maintenance.

She was concerned about whether the information provided to the Committees by Eskom was consistent with past reports. She noted that the President always gave the country hope during his SONA speeches, while Eskom always presented opposing information. She wanted to know if the President’s speech on Thursday would reflect the same information shared by Eskom. Did Eskom have regular meetings with their staff to discuss the challenges at the entity, because the people who were in the best position to understand the extent of situation in the power plants, were the ones who were operating them?

Mr N Dlamini (ANC) said the CEO’s presentation seemed to be approaching a point but never got to it, and noted that the issue at hand was power supply. The numbers presented by the CEO pointed towards nuclear energy as reliable and cheaper, and IPPs as more expensive, but there was no mention of a permanent solution for the country. Part of the Board and the Executive’s work was to advise government on the decisions they should take that would benefit the country.

Part of the issues that the labour unions had raised was the issue of a manager who had been sent to Kendal power station, where there were two functioning units. There were six functioning units by the time he left, but the manager was moved elsewhere. Eskom had not responded to that issue, and in their response, they must mention the number of units that were currently working at Kendal. According to his understanding, the diesel generators were a backup system to be used to maintain power supply when one or two of the units had issues. However, it appeared as if Eskom had moved away from coal and started using diesel to generate power.

He also had an understanding that there was an agreement between Eskom and the coal mining companies that the mining companies would sell lower grade coal to Eskom and make money by exporting higher grade coal to Europe and other countries. The presentation insinuated that the coal that should go to Eskom was being exported. He wanted to know whether Eskom was using the same grade of coal as that was used in the European market. He said the cost-benefit ratio on how much Eskom was spending and receiving on IPPs had not been clarified in the presentation, and asked for clarification.

Mr S Swart (ACDP) said the question that everyone was faced with, which was also alluded to by the Board Chairperson and the Eskom CEO in past meetings, was the degree and the permanence of load-shedding. He appreciated that it was difficult to project that, given the limited EAF. To create a level of predictability, he asked the Board Chairperson to unpack his projection for the next two years and the risks of the country reaching stage 8 of loadshedding.

One of the solutions that needed to be considered was assisting Eskom with diesel, and other committees had to be held accountable, especially the Finance Committee, on why funds were not being made available. Regarding criminality in Eskom, he said there was R2.5 billion which had been paid to the criminal and asset recovery account following serious offences at Eskom. He asked Mr de Ruyter if he was able to apply to recover that money for Eskom, and how Parliament could assist him in doing so, as a portion of that money could assist the entity in buying diesel.

He asked the CEO to comment on the delays in the implementation of bid window 5, which should have already been online and was now expected to be online only in 2025. Why was the Department of Mineral Resources and Energy (DMRE) not being held accountable for the delays in bringing bid window 5 online? That surely impacted the amount of load-shedding the country was experiencing.

He asked for a comment on the appeal against NERSA’s rejection of Eskom’s 3 000 MW gas power facility application, and what the Committees were doing to hold NERSA accountable for that application not being granted. In exercising its oversight, Parliament had failed to assist Eskom to collect R57 billion in outstanding municipal debt, and it was concerning to hear that the debt was going to increase next year during the run-up to next year’s elections.

He had been part of the Eskom Enquiry of the 6th Parliament, where it was said that in the financial year 2018/2019, maintenance had dropped from R35.8 billion to R31.7 billion, and that was where the problem was. He said the current Board could be held accountable, but South Africa was facing load-shedding because of a lot that had happened before the new Board was appointed.

Mr G Cachalia (DA) wanted to know how much of the generating gap would be filled by the initiatives Eskom was planning to bring forward in the short term at Kusile, and the additional capacity that amounted to some 4 062 MW, barring the contingencies of unplanned outages. What impact would the unplanned outages have or add to the gap in generation, and at what cost? How much grid capacity needed to be opened and at what cost and timeframes? He asked about the significant number of white people recently let go at Eskom.

Regarding consequence management and equity issues, what would Eskom require to assist them in keeping the lights on, and how would they push those incumbents out of the way? What progress had been made at Medupi Unit 4? What further assistance would Eskom require to deal with theft, sabotage and corruption? Given that coal and nuclear appeared to be the best option in the short term, how much diesel would be required during the maintenance and repairs, and at what cost? Had Eskom approached National Treasury in that regard, and for the transfer costs? Lastly, he wanted to know what the CEO would like to see that would assist him and his successor in carrying out the plan that he had presented to the Committees.

Mr W Wessels (FF+) said the increasing municipal debt was a stumbling block to Eskom’s finances, but the other side of the coin was that a lot of municipalities would say Eskom also owed them money due to agreements that were reached in previous years and would dispute the debt, which would make settling the debt much more difficult. He asked for Eskom’s opinion of that, and whether they knew the portion of the debt from the sale of electricity and the portion that was penalties and interest. This was important in terms of accountability and one of the contributing factors was the implementation of increases in tariffs. When NERSA approved an increase in tariffs, Eskom implemented those tariffs from 1 April, whereas the municipalities could increase their tariffs to their consumers only from 1 July, which created a lot of interest and penalties on outstanding debt.

On the international purchase and sale of electricity, he said, looking at the integrated annual report, the actual sales to international consumers were 13. 298 gigawatts per hour. The target for the current financial year was 11. 219 gigawatts, and the purchases were targeted to be at 8.678. Had that been reviewed, and what were the latest figures in that regard? Were international consumers charged the same tariffs, and what was the relationship between what South African customers were paying for electricity compared to international standards?

The highest electricity sales from Eskom in 2022 were to Zimbabwe and Nampower. Nampower had confirmed that they were not experiencing load-shedding even though the biggest power supplier in Namibia was Eskom. Had this been reviewed, and were there any other developments in that regard? It was also mentioned that Eskom was now procuring and purchasing electricity from Mozambique, but in June 2022, Mozambique was the biggest outstanding international debt to Eskom. In the agreement of Eskom purchasing electricity from Mozambique, was there any negotiation or offset of outstanding debt regarding what Eskom was paying and purchasing from them?

There was also a dispute on the revenue service and rebates on diesel which would create significant cash flow to purchase diesel. Were there any developments in that regard? How would the application for a wholesale licence for diesel enable Eskom to have more cash flow for diesel procurement? Regarding the decommissioning of units, he wanted to know whether the maintenance or end of life weighted more. He understood that it was going to be expensive to switch on decommissioned units, but Eskom was planning to switch on another unit by March 2023. Was Eskom reconsidering doing that to bring some relief to keeping megawatts in the grid?

On the skills gap, he said if one looked at the employment equity plan for 2023 until 2025, it had a lot of uncertainties because skilled technical African males and white males would have to be reduced to meet equity targets. Was that reasonable, given the shortage and skills gap, because technical people were being sacrificed to maintain a target elsewhere in the institution? Was this equity plan being reviewed?

Mr M Mahlaule (ANC) thanked the Eskom Board Chairperson for not bringing Mr Le Roux to the meeting, noting that he was patriarchal and would not have been allowed to sit in the meeting. He also acknowledged the presence of Eskom's Chief Operating Officer (COO), Mr Jan Oberholzer, in the meeting and said he was disappointed to notice that he had not attended the meeting at Megawatt Park while he was in the vicinity and knew that the Committee was doing oversight on that day.

This was like another incident that had happened on the day when the Eskom Board Chairperson appeared very calm when the outgoing CEO went to a World Bank meeting without him when she should have been there so he could understand what was going to be signed on behalf of the country and the power utility. Given that Mr de Ruyter had resigned but was continuing with his duties, from the time of his resignation until now, how many contracts had he signed on behalf of Eskom? He felt this information was important for the public to know, and made an example of how when apartheid was nearing an end, a lot of contracts were signed by the outgoing government regarding the country’s future.

At the Mining Indaba, small scale miners were saying they belonged to municipalities in terms of their electricity and not Eskom, but Eskom, on the other hand, was saying the miners owed the entity. It would switch their power off to make them pay, affecting the small miners and processors. Eskom wanted money and municipalities had to generate money from the people that Eskom was switching off, so how was Eskom going to get the money? Was there a plan to balance the sustainability of small processors and miners to stay on their jobs without being switched off by Eskom? Why was Eskom sending the small-scale miners back to municipalities when they requested to be powered by the entity?

He said the slide presenting the figures of the costs of IPPs compared to nuclear and coal had been disturbing, and commented that South Africa was being told a lie that nuclear power was expensive and should not be used. Nuclear energy was 46 times cheaper than IPPs, and coal was nine times cheaper than the IPPs, and he asked what Eskom was trying to do with the IPPs that were being shoved down the throats of South Africans. Why was Eskom advocating for IPPs that were expensive? “The tendency of Eskom executives saying South Africa is moving from coal to renewables must stop because we did not sign for the move from coal to renewable energy -- we signed to reduce high carbon emissions to low carbon emissions,” he said.

When the entity was unbundling into three -- generation, transmission and distribution -- whether as a government policy implemented by Eskom or the DMRE, and was complaining about the debt owed by Eskom, which entity was going to be responsible for the debt servicing? The Committees needed to know, because when the unbundling process was finished, none of the entities must ask for bailouts.

Ms V Malinga (ANC) was interested only in when the issue of loadshedding would end. She said the issue of municipalities owing Eskom had been persistent since she had become a Member of Parliament, and it was escalating. Committees had made suggestions as to how Eskom could collect their money from the municipalities, and she had hoped that the CEO would provide feedback to the Committees on their interventions and interactions with SALGA and COGTA to have municipalities pay off their debts. According to the Eskom CEO, fuel and coal were susceptible to corruption, and she wanted to know what was not susceptible to corruption, according to him.

The presentation focused on the top six priority stations, including Tutuka, which the CEO said did not yield any financial sustainability to Eskom. Why would Eskom focus on Tutuka if this was the case? The unions had said load-shedding was done on a willy-nilly basis. That union and employee opinions were not taken seriously by the executive, as they had continuously suggested ways to solve loadshedding. Were the slides presented to the Committees inclusive of the inputs from the employees and unions on how to solve load-shedding?

She came from a coal province and supported the coal power plants, noting that renewables could not meet all needs without a baseload of coal. The country needed a mixed energy solution that would include coal, gas, wind and nuclear. She asked for clarity on the trucks that transfer Grade-A coal to foreign countries and what the logic was behind Eskom using lower grade coal and exporting higher grade coal to European countries. She also questioned the use of diesel by Eskom. She said someone within the Executive or the Board of Eskom might be benefiting from its use, because they had failed to explain its importance in restoring power to the country. Lastly, she wanted to know if Medupi would ever be 100% functional, and asked if the people responsible for its failure had been called to account.

Mr K Mileham (DA) said coal-powered plants and diesel-powered plants were completely different, and a basic understanding of electricity generation in South Africa was needed to be able to make a meaningful contribution to the discussion. There was an indication that some 1 200 megawatts of importable electricity, and he wanted to know where that number came from because as he understood it, there was not much surplus capacity available in the Southern African power pool. He asked how much Eskom was looking to import, where it was coming from, and who was generating it.

On slide 4, the CEO spoke about 2 600 megawatts being delayed due to NERSA concurrence and alignment with the procurement mechanisms of the DMRE. What were the concurrences that Eskom was waiting for, and why was there a delay from NERSA? The CEO had also spoken about the 2024 grid capacity assessment that was available on the Eskom website. How quickly and how often was that assessment updated, because it appeared that in bid window 6, bids were submitted in terms of the grid capacity assessment, but when it came to awarding the bids, the capacity had already been taken up by other sources. Could one rely on the document that was on the Eskom website? If not, when would it be updated again?

In the last engagement with the Joint Portfolio Committees towards the end of 2022, the CEO mentioned that about R40 billion would be needed to invest in transmission infrastructure. Was that plan still in the pipeline, or had it been budgeted for? When could one expect to see the additional capacity being made available for new generation? Lastly, what obstacles still stood in the way of Eskom reaching the projected EAF targets in its turnaround plan? What did government, Treasury and Eskom need to do to reach their targets?

Ms R Komane (EFF) asked for the timeframes for when the Eskom Board expected to resolve the matter involving Mr Le Roux. Given all the responses made by the CEO to the allegations made by organised labour unions, did Eskom hold strategic meetings with the unions? If they did, why were the issues raised with the Committees? How did Eskom respond to the unions when they raised the issues? In her view, the Eskom Executive did not hold strategic meetings with the unions because if they did, many of the issues could have been resolved internally without being escalated to Parliament.

She asked Eskom to say whether they agreed that nuclear energy was the more viable and affordable option to solve the energy crisis in the country than the IPPs. The Koeberg nuclear power station’s operating licence was expiring next year, and the IRP 2019 allowed an extension for 20 years. Would Eskom have completed the necessary regulatory requirements to apply for an extension by next year? Had Eskom started the necessary applications? If they had not started, this would raise alarms about their intentions regarding the nuclear power station.

Econ Oil had been accused of having received its contracts fraudulently, a case had been appealed and the company was banned, but they still had a relationship with Eskom. She asked the CEO to explain that relationship. The CEO must also explain the ABB company's R2.2 billion contract for work at Kusile, and how the company subsequently subcontracted some of its work to a company called Impasse international, which the courts were also probing. She asked the CEO to explain the work that ABB did for Eskom, given the structural failures at Kusile Power Station.

The CEO had also mentioned that Eskom was in the process of recovering the R600 million that was unlawfully paid to Trillian Company and McKinsey & Company. How far was Eskom in recovering that amount? Regarding the power plants that were going to be closed, she asked whether there were consultations with partners and labour unions to inform them of what was going to happen, and whether they had been allowed to come up with alternative solutions to the closure of the power plants.

Mr M Wolmarans (ANC) said that given the process that needed to be followed in the appointment of a new CEO in a public entity, and the severity of the current energy crisis in the country as well as the looming exit of the current COO of Eskom, what plans were in place to mitigate issues regarding the time factor in the absence of the CEO? He asked this because the reports that Eskom gave were looking towards the long term, and there might be issues in-between if a new CEO was not appointed.

If the cash requirements for alleviating pressure on the grid and keeping Eskom afloat within the projected turnaround time of 24 to 36 months were met, how would it affect the turnaround time for resolving load-shedding? Given that the IPPs were expensive and Eskom had entered into some binding contracts with the IPPs, were there provisions for review of such contracts?

There were allegations that Eskom’s current grid did not have the capacity to take on more power from the same renewables. If this was the case, what were the implications of this for load-shedding? What was the plan to mitigate this situation? Regarding the NERSA licensing delays, he wanted to know if NERSA was an active participant in the joint meetings with the task teams, and if NECOM in trying to resolve the energy crisis.

Ms T Modise (ANC, North West) said one of the biggest challenges of state-owned enterprises (SOEs) in the past had been members of the Board being part of many other boards, which had caused them to not fulfil their duties at some of them. She wanted reassurance that the new Eskom Board members were not involved in many boards, and whether they put Eskom first. She felt that Board members who were involved in many other boards were going to be a liability to the Eskom board. She wanted to know whether the Komati Power Station had been decommissioned.

Mr T Le Goff (DA) said the United States Overseas Security Agency had held a briefing on 20 January about a prognosis of what would happen in the event of a national blackout. The national control manager of System Operative, Transmissions, at Eskom had been quoted as saying there would be looting and civil unrest if the grid collapsed -- it would look like the July unrest of 2021 but on a national scale, and what was left after a national blackout would be like what was left after a civil war.

Looking at the overall prognosis and trajectory, load-shedding had been four times higher in 2022 than 2021, and 2023 was the worst on record and was looking to get even worse. South Africans had never paid so much for so little, and it was clear that they were between a rock and a hard place. He wanted to know what Eskom needed the government to do, because the present system was simply not working and it seemed like the entire coal value chain in the country was one giant criminal enterprise.

The world energy outlook in 2020 released reports that Solar PV and wind energy were the cheapest energy source on earth. In terms of the Just Energy Transition partnership and all the other agreements that might be concluded but were not yet in the public domain, was Solar PV or wind energy included in the plan? If they were not included, what would the impact be on the plan?

He said the current energy crisis in the country needed to be solved within the next 24 to 36 months, but the current nuclear build in the country would probably be finished only in the next 12 to 16 years. He asked Mr de Ruyter to explain how long South Africa would take to deploy a nuclear build and whether it would be a viable solution to the current energy crisis.

Mr S Gumede (ANC) said the President had made a plea to Eskom that they must not implement the 18.6% electricity price hike approved by NERSA, and asked for progress on that issue. What was the progress made in appointing the new CEO, since the resignation of the incumbent? He commended the Chairperson for the decision to adjourn the previous meeting. He noted that the Committees were reaping the fruits of the adjournment in the current meeting, as all the Members were asking pertinent questions and discussing important issues. Many situations could have caused problems in the previous meeting if it had been allowed to proceed as it was going.

He recommended that the Committees go for community outreach, and noted the importance of the inputs and questions raised during the meeting and how they could possibly solve the energy problem in the country if implemented in practice. The CEO had mentioned a reduction of loadshedding by two levels, but did not mention from which level, because it could be from stage 10 to stage 8. He also mentioned the emission requirements, and noted that when the decision to reduce emissions was taken, the problems were not as severe. He added that the communities must be first priority in that regard.

He was interested in knowing the capacity that could be expected from the successful repair of the six power stations mentioned in the presentation. The principles of problem-solving state that one must prepare a fall back option or a plan B. All the possible solutions must be assessed, and if things do not work according to the initial plan, there must be a plan B in place. Did Eskom have a plan B if things did not work according to their plan? When was it likely that load-shedding would be solved according to Eskom’s plans and projections?

Ms J Nemadzinga-Tshabalala (ANC) appreciated the presentation, and said it provided most of the details and information that the Committees had been looking for. She wanted to know how far the unbundling plan had taken Eskom in trying to resolve the load-shedding issue thus far. The details and information provided, including the issues of criminality, sabotage and corruption within Eskom, should have been provided to the Members a long time ago, and not only now that there was an energy crisis. She said if the Zondo Commission of Inquiry had been successful, the fraud and corruption happening in SOEs like Eskom resulted from state capture. They needed to figure out what was causing the current energy crisis at Eskom.

Why was there still corruption at Eskom after the state capture had been probed and investigated? She said as much as people may want to blame the ANC government and its corruption, some people were tasked with handling the day-to-day operations of the entities, which needed to be probed. MPs needed to ask themselves where they had been for the past four years of the 6th Parliament, as the corruption and theft had continued happening under their noses. Another question was whether there was another state capture during this 6th Administration at Eskom and in Parliament.

The Committees were responsible for oversight, and the Constitution requires them to probe, examine and investigate the load-shedding issue as a matter of urgency. She agreed with Mr Gumede that the Committees needed to conduct public engagements, and added that they needed to do them with Eskom to answer all the questions. She asked the CEO if the people of the country, including professionals of the industry, multi-stakeholder forums, labour unions and society as a whole, had been included when the Just Energy Transition was introduced. She felt that the confusion that the country was faced with was mainly because the public was not included in the decision-making by Eskom.

She asked for a clear strategic plan on how Eskom would deliver a minimum of 10 gigawatts of energy by the beginning of 2025 to end the rolling blackouts in the country. National Treasury needed to look into taking over between a third and two-thirds of Eskom's debt, thus freeing it to allocate more funds to maintain the entity. A strong, multi-stakeholder Just Energy Transmission team was required, specifically for Mpumalanga. Eskom must explain how the Just Energy Transition would not threaten the livelihoods of community members and workers that depend on the coal mines.

There also needed to be a clear plan regarding the $8.5 billion committed by the United Nations (UN) and European countries that would be assessed only on terms that suited South Africa, with the bulk of the loan funds used to address and extend the grid, and the grant funds used to support the Just Energy Transition in Mpumalanga. The Eskom Board and management needed to focus on improving the efficiency of existing coal power plants and raising the EAF from 50% to 75% by 2025, and to provide to South Africans, in an understandable language, plans as to how this would be achieved. South Africa's public and private financial institutions must be mobilised. The security cluster in government must intensify its efforts to root out the corrupt elements within Eskom. Two years was a very long time, and the country’s people and the economy could not wait for that long -- the load-shedding issue needed to be resolved with great urgency.

Co-Chairperson Mkiva said South Africa was the second biggest economy in Africa, and it could not afford to have this kind of load-shedding. Eskom had to answer the question of dealing with the emergency power that was currently needed in the country.

Co-Chairperson Magaxa said the issue of the unions versus the executive was important, because the unions represented the workforce. If Eskom had a workforce that was hostile to its agenda of resolving the crisis, even its projected two-year timeframe would be a pipedream. Unions claimed that there was currently no relationship between collective labour and the executive, including the Board. They claimed that there was an autocratic reign of terror at Eskom, with no freedom of speech and no access to information, except instructions, and they felt that they were used like tools.

They said power stations were just closed with no explanation, and power station managers were chopped and changed at any given time with no explanation and no reasons given to them. Workers were just told to switch off electricity for no reason. In most cases, they claimed that the instructions came from people who knew nothing about the material realities in the specific power stations. These were the reasons for the low morale among Eskom workers, and they regarded the COO as the main dictator whose word was final, and who was known to be intolerant towards black managers and employees.

He said the workers had made an example of a black manager who started working in one of the power stations when it had only two working units and had managed to raise the productivity to six working units. However, he was removed from the specific power station through a quasi-promotion that did not give him the same powers and access to the power station. The power station was back to operating with two units.

Co-Chairperson Luzipo said according to his interpretation of the presentation, Eskom had reached an irredeemable stage and could not be turned around, and asked if his interpretation was correct. If the report spoke to alternative solutions for energy, then it meant that Eskom could no longer produce energy on its own. He wanted to know how Eskom arrived at its target of a 75% EAF by 2025, and why they had not targeted 100% or beyond that for surplus purposes, because three areas would need to be considered if they did that -- the unplanned, the planned, and the other capabilities which were the unplanned capability factors and the planned capability factors. Eskom’s target of 75% meant they were aiming for far less than 75% if the unplanned, planned and other capabilities were considered.

He said at some point in the past, Eskom had received a global award as the best because it was delivering an EAF of 89%, and asked if they had not set their bar too low in their current turnaround plan. He said a rumour was going around that Eskom was complaining about PetroSA overcharging them. He asked the Board Chairperson if Eskom had considered interacting with its sister SOEs, such as Transnet, to help them on the issue of sabotage by carrying their coal instead of the trucks.

He said when coal was transported to Eskom, the elements of sabotage such as stones being put in the trucks had been found, but when the best-produced coal was extracted to go to the Richards Bay coal terminal, no elements of sabotage were found. Had Eskom interacted with Richards Bay to find out how they operated, and why they were not affected by sabotage? He felt that there was no interaction between Eskom and the other SOEs. Had Eskom engaged with National Treasury and PetroSA to try and get them to supply them with diesel at a reasonable rate, even if they could supply them on credit to avoid detriment to both SOEs? Some acts of sabotage included a lack of concentration on technology -- had Eskom engaged with the Council for Scientific and Industrial Research (CSIR)?

He said the Committee had had a bad experience at Eskom before, when the Chairman of the Board became the Acting CEO at the same time. What interim measures were being considered to avoid a very untenable situation, when both the CEO and the COO were exiting the entity? Did Eskom have a second layer that would be able to hold the fort?

There was a report that said the problem at Kusile and Medupi was that all the coal power stations of Eskom, except for two which were designed through an Australian model, were running on low-burning coal. If that was true, was the allegation that the structural design map of Kusile could not be found, making it difficult for the engineers to conduct repairs because they did not know the design?

There was an allegation that Mr Oberholzer was one of the people handling the management of the construction of the two power stations. The allegation also added that one chimney that connected three units had been put in as a cost-saving mechanism, meaning if that chimney was faulty, the other two units would also collapse. How true was this, and if it was true, was this not a wasted resource? There had been an article about a Swedish company, ABB, which had been subject to an investigation conducted by the NPA, which had conceded that it paid $315 million and had been paying bribes to one of the senior officials of Eskom. Was this true, and if it was, were the necessary steps taken to investigate the official? Was the official still an employee of Eskom, and what steps did the entity take to hold that person accountable?

In the presentation during the Koeberg oversight, it had been said that there was someone who had run away because there was a plot to kill them, and now the person is required to have bodyguards. Did that still stand? There was also a rumour that the CEO of Eskom had been poisoned. Was this true -- was there a case that had been opened, and was there an individual who had been held responsible for that action?

Eskom’s response

Mr Makwana said some of the questions that Members asked may have been missed during the detailing of the presentation, and would be pointed out in the responses. The common theme of questions asked to the Board involved what could be done to end loadshedding. As the Board had mentioned in responses to such questions in different forums with various stakeholders, some matters were within Eskom’s control, and there were matters that were out of its control.

The turnaround plan that the Board approved was approved on the basis of addressing those within Eskom’s control, while equally engaging with the shareholder and other key decision-makers to address matters outside of its jurisdiction. NECOM had become a useful forum in that regard, especially with matters regarding COGTA, SALGA, the SAPS, etc., because NECOM had become an inter-ministerial committee and it had started applying the concept of action maps, wherein decision-makers sat in meetings and were compelled to make decisions. The Board felt it had made considerable progress in that regard.

There were two low-hanging fruits outside Eskom's control that perhaps needed everyone’s contribution to try and leverage, including Parliament. The first one was demand-side management. In the build-up to the FIFA World Cup, then President Kgalema Motlanthe led the country through an initiative called 49M, which was an initiative that sought to get every citizen of the country working together to save electricity. The initiative was named 49M because the country had a population of 49 million. He said a lot of buildings, including Parliament, malls and other institutions nowadays, deviated from that energy-saving initiative, as they all used light bulbs that were not energy efficient.

Looking back at the 49M initiative, demand-side management alone had saved the country between 2 000 and 3 000 megawatts, equal to three loadshedding stages. If the country banded together again on its collective different spheres of influence and drove demand-side management very hard, a lot of energy could be saved, and the stages of load-shedding would be reduced significantly. Vietnam, which was a country worth studying because of its composition, provides a good case study of the power of rooftop solar, especially in public buildings that had corporate headquarters like the Cape Town central business district (CBD). Rooftop solar could also make a huge difference, and within NECOM, efforts were being looked at to see how this could be achieved, and announcements in that regard would be made in the near future.

Eskom had done a pilot near the Brandford area in the Free State, where they had put together what they called a ‘power station in a box,’ leveraging a micro grid which was a containerised power station that could power up to 50 households, and it could be rolled out on a mass scale. It costs R2 million a box, and a lot of municipalities could be saved from load-shedding through it.

Regarding the NERSA tariff, he said it would be useful for Eskom to present a refresher to the Committees on how it made revenue at a later stage, because the entity did not have an option, but every multi-year cycle, it had to submit a tariff application.

The President had asked Eskom to look at how they could ease the impact of their tariff hikes on the citizens of the country. Easing the impact meant looking at things the entity could delay to ease the impact. The entity did not receive an instruction from the President not to implement the tariff. If Eskom did not increase the tariff, the Minister of Finance would have no basis to give them any revenue during the budget speech, because they would be found derelict in implementing a decision that was important for the revenue of the organisation. He said they had prepared several documents, including a document that would be submitted to the President in his capacity as the Chair of NECOM, as well as to the Department of Public Enterprises (DPE, the shareholder) and to National Treasury to look at how the indigent and the poor could be insulated to minimise the impact of the tariff.

Mr Makwana said anything Eskom did with the World Bank and the African Development Bank or any of the sovereign funds they dealt with was supervised by Treasury, and the decisions to sign anything required the Board’s approval. He assured the Members that no one could or had signed anything with the World Bank on behalf of the country, nor for his individual benefit, without the approval of the Board or Treasury.

He said Mr de Ruyter had not been dismissed as the CEO of Eskom -- he had resigned and was currently serving his notice period. If he had been dismissed for any reason, the discussion would have been different, because he would have left the position with immediate effect. His resignation had been discussed with the shareholder Department before it was accepted, and everything was done according to his employment contract. Mr Makwana had no ambition to become the acting CEO of Eskom, as his hands were already full with his other business interests.

Eskom had never had a Chief Operating Officer in its history -- the role had occurred over the years with the outgoing of multiple CEOs, where one of the incumbents, together with the previous Chair of the Board, felt that they needed someone with operational experience because they did not have the in-depth understanding of Eskom.

The Board was clear that a government decision had been made that there would be three entities or divisions that formed Eskom Holdings, which would be transmission, generation and distribution. 90% of the problems that the Members had raised when they were asking questions, required the separation of the three divisions to occur because to add more power to the grid, there must be an independent transmission subsidiary so that other players could buy, knowing that Eskom was not a player and referee at the same time. That was a government decision that Eskom had to implement.

As Eskom implemented this decision, there would be divisional chief executives for the three divisions, meaning there would be a CEO responsible or transmission, for generation and for distribution, which was how Eskom had been run previously. As Mr Oberholzer was retiring, there would be no need for a new COO, as it would become redundant because of the three divisional structures. However, there would be a need for a Group Chief Executive and a Chief Financial Officer to hold the Group together.

He said Co-Chairperson Luzipo was correct that in 2001, Eskom had been defined as the power utility of the year, but at that time, the EAF had been at 87.7%, which was 1% higher than the global benchmark. Anywhere in the world, an energy utility was deemed fully operational if the EAF was 86.5%, meaning a utility could never be run at 100% because there would always be outages and units that had to be serviced. In July last year, when the President announced the NECOM, he was the one who set the 75% EAF target, because that would be the closest that Eskom would come to normalcy. Eskom was saying they could achieve that 75% beyond 2025, and they were linking their EAF targets to each financial year because of the debt and affordability each year. Eskom was also regulated by NERSA, which determined how much they could buy, and they had a duty by law to account to NERSA.

He said how PetroSA charged for its fuel was outside of Eskom’s control, but through the key principals that were involved with Eskom, the DMRE and National Treasury, and under the auspices of NECOM, a funding model had been concluded about three weeks ago which would allow Eskom to buy fuel from PetroSA. Eskom’s investment and finance committee had worked out a model to juggle the various financial priorities in its constrained income statements and balance sheet, to ensure that it had a proper procurement programme for diesel.

On whether Eskom was in an irredeemable state, he said he was hoping the cameras were still off since the break, because he wanted to make a heartfelt appeal on behalf of the employees of Eskom to the Committees. He asked the Members to put themselves in the shoes of the Eskom employees, as every time the harsh comments were made, they were listening. Perhaps the harsh comments may just be unintended consequences that happened, and may further demoralise an already bruised group of employees. If they heard how incompetent and poorly capable they were of doing their jobs every time they switched on the news, that was what they would believe. “Let us try and change the narrative, let us boost them and lift them up. Let us walk in their shoes and in shoes of their children, who are being bullied at their schools. Let us walk in their families’ shoes, and be a little bit more empathetic,” he said.

Regarding the CEO search, he said they had advertised the position. The Public Finance Management Act (PFMA) required them to follow a specific process, which they would do. Eskom also needed to do its own human resources (HR) processes in terms of its policies so that anyone within Eskom who wanted to apply for the position could be allowed to do so. Lastly, in terms of best practice, they had to look elsewhere in the world to see if any South African would be interested in running the entity. The aim was to restore the entity to the best global standards, so if it meant looking outside the country to do so, they would do it. They would update the Committees between now and the end of March on the progress of the process of looking for the new CEO.

He said Eskom did not have a policy on the number of boards a member could serve or not serve on. In the banking sector, where he was about to retire, the Reserve Bank had a rule called the "Four Plus One" rule, where one was deemed to be adequately boarded if one served on the Board of a bank and four other institutions, so a few members of the Eskom board were in that category. He said that in the 110 days since the Board assumed office, it had met over 50 times, meaning they had meetings every other day and if they had not been as diligent, the progress they had made thus far would not have been made.

Regarding the estimate for their diesel consumption, Mr de Ruyter said that depending on the degree of the unreliability of their plants, they were working on about R4 to R5 billion for February, and a similar amount for March.

On the R57 billion owed to Eskom by municipalities, it had engaged extensively with COGTA, National Treasury, the DPE, SALGA, and all the entities that could possibly have a bearing on the outstanding municipal debt. Up until recently, until it was superseded by NECOM, there had been a Presidential task team that was chaired by the Deputy President, which had paid specific attention to the matter of outstanding municipal debt, but it had not been able to make any considerable progress on the matter in spite of the Deputy President going twice in person to Maluti-a-Phofung, as the municipality had declined to engage in an agreement with Eskom to resolve the debt. The R57 billion excluded interest, and the interest amount had accumulated to R10.921 billion.

The cost of power imports, bearing in mind that they also had to pay transmission tariffs from the country concerned to South Africa, varied depending on the time of day between R1.50 and R1.70 per kilowatt hour. To offset the electricity production using diesel costs about R4.50 per kilowatt hour, depending on the diesel price, meaning it was still cheaper to import.

The prices at which Eskom exports had a target margin of 15% net operating profit after tax, so it did not sell to any foreign utility at a loss, and did make money. In the case of Namibia, they had significantly increased the price they paid when the agreement was signed after the negotiations. Eskom had curtailed its sales to its foreign customers and had contracts in place, but all non-firm exports of electricity had been cancelled for now.

The debt due to Eskom from EDM, the Mozambican power utility, was R894 million. They had disputed R350 million of that, and Eskom was engaging with them in dispute resolution proceedings to see how to resolve the matter. It was unfortunately not impossible for Eskom to offset what they owed against the outstanding debt due to them from EDM.

The statement that no salary increase had been given for over a decade to Eskom employees was not true, because salary increases were given every year, and only management had not received salary increases for four years, except the Executive Committee, when approval to reward them had recently been obtained.

Regarding the frequency of engagements with labour unions, he said they had a quarterly strategic forum attended by senior Eskom management and union leadership. There was also a monthly central consultative forum, a monthly restructuring consultative forum, an annual central bargaining forum focused on wage negotiations. Then there were meetings at a divisional and business unit level held monthly. There were regular and wide-range engagements with organised labour on a very formalised basis.

On the cost of IPPs, he said the initial bid round that was issued had been expensive, as it came in at R4 552 per megawatt hour. Since then, the prices have decreased significantly, so much so that for bid window 5 for PV solar power, the cost was R492, and for wind, it was R431 per megawatt hour. This was much lower than Eskom’s cost of generation. Unfortunately, the bid window 1 contracts were signed and Eskom had to abide by them and see them run their course, bearing in mind that they still had 11 or more years left to run.

On the cost of alternative forms of generation, he said a United States bank had published an annual study comparing the levelised cost of electricity, which included the cost of building the plant in question and operating it. Building a nuclear power plant was very expensive from a capital point of view, but operating it was cheap, because the money was spent upfront. A coal-fired power station was cheaper to build initially, but more expensive to operate because one had to keep buying coal.

The relevant numbers for solar power plants were 4.1 US cents per kilowatt hour, and a plant could be built in 18 to 24 months.
Wind costs 5.4 US cents per kilowatt hour, which was in line with the bid window 5 prices, and a utility wind farm could be built within 24 to 36 months.
 A gas plant costs 7.3 US cents per kilowatt hour, and could be built in 24 to 60 months, depending on the source of the gas, its availability, and the various regulatory hoops one had to jump through.
A nuclear plant costs 19.8 US cents per kilowatt hour, and the estimated time to construct a conventional nuclear plant was 12 to 15 years.
If one could obtain funding for a new coal-fired power station, it would cost 15.9 US cents per kilowatt hour and would take about 10 to 12 years to construct.

The disadvantage of renewable energy was that it was self-dispatchable with the sunshine and the wind blow, so one needed to add the cost of storage to it, but even so, it remained the cheapest and quickest way of addressing the shortfall in the generation capacity. This was why the President had lifted the cap on own and embedded generation, which was a farsighted move to resolve the energy crisis.

He could not disclose the amount South32 paid for electricity, but the number floating around on social media was egregiously wrong. South32 did assist Eskom during constrained periods, and Eskom did interrupt them and used the residual heat in their potlines to add about 250 to 300 megawatts back into the system. Eskom makes money from the electricity it sells to South32, and the company also assists Eskom in maintaining stability on the grid during load-shedding.

Some of the illegal connections were located in municipal areas, which cost the municipalities a lot of revenue, but that was a problem to be resolved by the municipalities. When Eskom entered municipalities to resolve illegal connections, sometimes their staff were assaulted or kidnapped, and they had to go to municipalities with armed guards.

Eskom was making good progress with skills development, and needed to continue doing that.

On the suitability of the strategy to switch off old power stations, he said the best analogy was to look outside and see how many 50-year-old cars were driving around, which was not many, because they had reached the end of their mechanical time span. This also applied to Eskom’s old power stations, specifically the Komati Unit 9, which had been shut down on 31 October last year. It was shut down because of the terms of the Occupational Health and Safety Act, as they could no longer lawfully operate it. The statement made by the unions that Eskom was deliberately not maintaining power stations was untrue.

He had no insight into the SONA address, and did not know what the President was going to present on the day. Energy planning fell within the domain of the DMRE. The Department was required to publish an integrated resource plan (IRP), which it did in 2019, and that plan was now due for an update. However, Eskom could not embark on its own energy plan because that simply was not allowed, as that would mean they were straying into the lane of policymaking. This was also the case in tariff determinations and awarding Section 34 approvals to build new plants, which was in the domain of the DMRE and NERSA. Where there were delays from the DMRE in bringing IPPs on the grid, those questions had to be asked to the Department. That also applies to the 3 000 megawatt gas-fired power plant Eskom wanted to build at the Richards Bay industrial development zone.

Referring to the exported coal, he said that when he was a coal salesman 20 years ago, the way that the coal market worked was that the mine would mine coal and then beneficiate it. The best grade of coal was exported, the medium quality coal was used by Eskom or by Sasol, and the poor quality coal which was not fit for purpose, was discarded and put on a big dump. What was happening currently was that the crooks were taking coal from the mines that supplied Eskom, driving to disused sites that contained discarded coal, and switching the coal to deliver the discarded coal to Eskom.

Eskom believed that the criminals exported the coal they stole from them because the good export quality coal from South Africa had been mined out. Coal was a wasting resource, and the coal that South Africa was exporting currently was of a significantly poor quality, which was what the thieves were stealing from Eskom. He did not want to reveal too much about Eskom's measures to prevent the theft of coal, but noted that arrests needed to be made for the crime.

Medupi 4 would come back online in September 2024, and Eskom had done everything it could to expedite the return of the unit. The CEO had engaged with the global chief executive of General Electric to see if they could find an available generator, and they had explored every possible avenue, but had been unable to bring the unit back online sooner. National Treasury had made assistance available to Eskom to give certain assurances to commercial banks that the money they borrowed to buy diesel would be repaid. The money that government departments owed to Eskom was not a lot in the bigger scheme of things, as it was only R13.4 million, which meant government departments were essentially not bad payers.

On the rebates from the South African Revenue Service (SARS), Eskom had intended to recover R5.9 billion, but their engagements with SARS had unfortunately not been successful. There was provision in tax law for an alternative dispute resolution which Eskom would embark on, and hopefully, the matter could be resolved amicably.

If Eskom were to get a wholesale licence, it would probably save around R45 per litre on diesel.

The Employment Equity Plan complied with the Department of Labour requirements, where the CEO had to sign a statement yearly, and Eskom was compliant with that plan. The Department reviewed the plan for compliance, and if Eskom was not compliant, then they would face consequences.

He said he did not sign any contracts, as procurement people did that. He sat on boards where contracts were discussed and approvals were given, but that was in the company of up to ten people who generally decided, based on the delegation of authority that applied. The notion that he would sign contracts without the knowledge of the Board was simply impossible.

Whether small scale miners could be supplied by Eskom depended on where they were connected to the distribution grid. Connecting to the grid was not optional -- they were either Eskom customers or municipal customers -- and it was not possible for people to want to change from a municipal grid to an Eskom grid. NERSA would have to approve the change, because they allocated the distribution licence according to the geographic area.

Eskom focused on Tutuka a lot because it had a lot of potential, as it was one of their younger plants and should be performing much better if it were not poorly maintained, and it was clearly in the grip of criminal syndicates.

The allegation that Eskom cuts power on a willy-nilly basis was untrue, because the failure modes of plants were random unplanned and unpredictable. The delays in the 2 600 megawatts were due to delays in the section 34 concurrence from the DMRE, and NERSA requirements to hold public hearings. NERSA was obligated by their legislation to do certain things and could not rush matters as they pleased. NERSA was also part of the discussions in NECOM, but their independence as a regulator had to be respected, and they also needed to be careful as to how they engaged in the committee.

Regarding the licence extension for the Koeberg power station, he said they were well on their way to replacing the two steam generators for Unit 1, and the outage was proceeding as planned. The Unit would come back to production by the end of June. There would then be a two month pause, where both Units 1 and 2 would be back online. In September, Unit 2 would be taken off for its outage to do the steam generator replacement and other work required to approach the National Nuclear Regulator to extend the licence for a further 20 years.

The work done at Kusile had nothing to do with the fuse that had collapsed. ABB had done the control and instrumentation work, and had since paid back to Eskom R1.775 billion, which was received by Eskom on 27 December 2021. A further amount of R2.2 billion was paid to the Department of Justice in the United States. The US Department of Justice had given some of that money to the National Prosecuting Authority (NPA), and Eskom was engaging with the NPA with the aim of securing some of that money for itself. Trillian owed Eskom about R600 million, but the company was now insolvent and the little money that remained in the company was subject to a claim by SARS. Instead of contesting the claim that SARS had over the money, Eskom had decided to let SARS fight the fight and to step back from the litigation process.

Eskom required an extraordinary investment of about R158 billion on the grid capacity, which was likely to go up to R174 billion. This was a huge challenge for Eskom to execute, because it required them to exceed their best-ever performance in terms of kilometres of line power on a consecutive basis for the next decade. Eskom was looking at alternative models to ensure that they could execute the work to connect about 50 gigawatts of new capacity to the grid in the next decade. It was an enormous ask that would need all hands on deck to resolve that as quickly as possible.

Komati had been shut down and had not been decommissioned. To decommission a plant, one must permanently put it out of operation, and that had not been done. That would cost around R350 million, and after the cost had been recovered, they would recover the cost of the materials that could be recycled as part of the demolition of certain parts of the plant.

Government was doing a lot at the moment with NECOM to resolve loadshedding. However, 2023 was going to be a tough year in loadshedding, especially because Kusile 1, 2, and 3 were off and Kusile 4 had been delayed. Koeberg would have only one unit online for most of the year, and Medupi was also off. There was a shortage of generation in place due to the collapse of the flue gas turbine.

He said using one concrete windshield was not a cost-saving measure. The concrete windshield protected the skew flues inside the windshield from the wind blowing it over, so it was essentially a structural protection for the flues, which was a common practice in all of Eskom’s power plants.

The Just Energy Transition had been incorporated, and there had been considerable public consultations, including with the Presidential Climate Commission, comprised of representatives of businesses, organised labour, civil society groups, and Eskom. It met regularly and had a fully staffed secretariat, and was a forum that would extend the public consultation process.

There was an investment plan for the $8.5 billion, which had been submitted to the partners and was under consideration, and Eskom featured very strongly in that plan. Eskom used local experts, who understood Eskom far better than foreigners, and there were well-qualified individuals inside Eskom. He disagreed with the notion that power stations were shut down with no explanation. He noted that with Komati, there had been extensive consultations with the unions, organised labour, and the community surrounding the power plant. One of the shop stewards at Komati had alleged that he was never consulted, but when they looked at the attendance register of one of the consultation meetings, his name had been there.

Eskom used Transnet to rail coal for them, which was why they had improved the Majuba rail loadout stations.

Coal imports were not contaminated because the customers on the other side would just reject it, which was the main disincentive to theft compared to Eskom, which was an easier victim of crime. Eskom had a contract with the Africa Exploration SOE to supply coal to the entity.

Lastly, he said a case had been opened regarding his poisoning, and the Hawks were investigating it.

Mr Makwana requested that any questions they may have missed be forwarded to them so they could respond in writing.

Concluding comments

Co-Chairperson Luzipo said the parliamentary staff needed to go at 19:00pm, and they needed to ensure that everyone had left the building. He requested that Members allow that process to happen, and adjourn the meeting earlier than planned.

He reassured Mr Makwana that when Members asked questions and raised issues in a meeting, they also gave him a chance to present his own side of the story, and they were not trying to alarm him or attack Eskom employees. Their intention was not to demoralise the workers because they might have already been demoralised, especially when Eskom closed the Komati power plant. It was important that Eskom provide its side of the story so that Members could make reasonable recommendations based on concrete information, and speak on facts and not on assumptions.

Ms Nemadzinga-Tshabalala did not think Members were leaving the meeting having received all the answers they expected to get, because the point of the Joint Committee meeting was to receive answers to questions, such as when load-shedding was expected to end.

Co-Chairperson Luzipo said Eskom would have to respond in writing to the following issues :

The issue of tariff models or tariff modalities.
The issue of PetroSA and Transnet, and their inter-relations with Eskom.
Whether Eskom was a viable institution.
The issue of small-scale miners who were put on the municipal grid, but were being affected by the municipalities owing Eskom.
The South32 issue, and whether there were institutions that paid for electricity at far lower rates than communities and households had to pay.
The ABB issue in detail.
The costs of the different energy systems.

Eskom Board Chairperson’s concluding remarks

Mr Makwana said they were delighted to have engaged and responded to issues in the manner they did in the meeting, and added that they would always welcome an opportunity to account to the public because that was the only way that progress could happen. He said the Minister of Public Enterprises had a forum where he invited the chairpersons of the boards of the SOEs under the DPE, which was one of the platforms where the gaps in engagement between SOEs were bridged.

Co-Chairpersons’ concluding remarks

Co-Chairperson Mkiva said from where they were seated, they had a belief that the problems facing Eskom could be fixed, and wanted the leadership of Eskom to give confidence to the public that the crisis could be fixed within a specific timeframe. His constructive criticism of Eskom was that there was an invisibility of leadership in the entity, and they were under-communicating with the citizens of the country when this kind of situation needed the entity to take them into confidence. He made an example of how during the COVID-19 lockdown, when the President appeared on television to provide updates on the pandemic, he assured the citizens that humanity was not going to its extinction, and noted that the country needed something similar to that with the current energy crisis. “These blackouts must not be sporadic because you could pre-empt what is going to happen tomorrow and the day after. Communicate with us so that we can plan our lives,” he said.

Co-Chairperson Magaxa said the two year plan was not helpful, and the Committees would like the management and the Board to work out a plan that would be convincing enough for society. Considering the economic effect that load-shedding had, as well as the impact on health and food security, two years was a long time to wait for the crisis to be solved. As the Chairperson of the Portfolio Committee on Public Enterprises, which was the first line of defence for the Eskom Executive when they introduced a three-year turnaround plan at the beginning of their term three years ago, he had been attacked by a lot of organisations for his assertion that the executive must be given an opportunity. This was why he believed the two year turnaround plan was not going to help the situation, because the crisis needed to be solved immediately.

He asked for a more concrete briefing on the Koeberg issue, and whether the steam generator project was progressing well, and if the issue of the person who had been suspended pending investigation was progressing. He wanted to know if there was an investigation, and whether it had been concluded and the outcomes thereof, because he did not want a situation where perceptions were made factual. The Committees were not only performing oversight over operations, but also on the environment in which the operations were being executed, and whether they were conducive to producing the required results. The issues between the workers and the executive needed to be resolved; otherwise, the two-year plan would be a pipedream.

Co-Chairperson Luzipo thanked the Members for their patience, and pleaded with them to behave cordially in future meetings and respectfully disagree with each other. He also noted that a few Members had left the meeting before it was adjourned without informing the Co-Chairpersons, and advised against doing that in future meetings.

He thanked the delegation from Eskom for their attendance and responses.

The meeting was adjourned.