Eskom 'not to blame' for bungling

2012-06-11 11:31

Cape Town - Eskom is not to blame for the state of electricity supply in South Africa, the Free Market Foundation has said.

The power utility has come in for criticism of its handling of electricity supply in SA, particularly during the rolling blackouts of 2008, and has asked the National Energy Regulator of SA (Nersa) for escalating tariff increases to reflect the cost of power generation in SA.

"I always say 'Eskom is not to blame' so I'm not one of those people. On the contrary, I think Eskom is a victim," Leon Louw, executive director of the Free Market Foundation told News24.

"Eskom doesn't actually itself recognise to extent it is a victim, strangely enough," he added.

The organisation submitted its arguments to the parliamentary portfolio committee on the Independent System and Market Operator bill, saying that the failure of Eskom was a policy failure.

State entity

The bill is meant to provide for resource planning of generation, and aspects of managing the electricity grid, but adds that the state should own 100% of the proposed independent system and market operator.

"What we said in our evidence to the portfolio committee last week in parliament is that they are to blame, not Eskom: This is a policy failure.

"It's a policy failure in that firstly, we have historically inherited from the past, the model which is quite common around the world, namely a government electricity utility that generates and distributes power through one single entity," Louw said.

He said that developed countries had moved away from the model of a single state entity that controlled electricity generation, but added municipalities could also produce their own electricity.

"Over the last 30 years or so, virtually all countries have abandoned that model and now have independent generating and an independent grid, and generating itself has been unbundled into different types.

"We actually happen to think that whether it's private or government isn't the big deal - it's unbundling that's the big deal."


Louw said that the electricity crisis of rolling blackouts was not a surprise because experts had predicted that a lack of proper maintenance would eventually collapse the system.

"The crisis is no surprise, it's not rocket science. Everyone knew it was coming; it was predicted and the government itself said, stripped of all the packaging, it really amounted to saying: That there were going to be IPPs [Independent Power Producers] entering the market; it would take up something like 30% of supply."

Eskom CEO Brian Dames conceded that maintenance programmes had been lacking, but that the utility would make up the backlog by the end of 2013.

"We are doing maintenance - unprecedented levels of maintenance this year of year as we go into winter. We've not done this before to address the backlog we've been talking about and to improve the safety and reliability of our plants.

"Our objective would be that by the end of next year [2013] we would have eliminated most of our backlog," said Dames.

The policy on IPPs have not resulted in these entities setting up in the way envisaged because of failures in the policy as well as apparent inaction by politicians, Louw insisted.

"You and I are in no position to judge whether Eskom was well managed: What we are in a position to judge is that policy was badly managed: The policy to bring in independent power producers, to have an independent grid - that policy was blocked, firstly by [former minister of public enterprises] Alec Erwin purely for apparently ideological reasons."

The issue of licenses for Independent Power Producers has hamstrung their ability to invest in electricity generation capacity and Nersa only approved licensing of 28 preferred bidders for the first phase of government’s renewable energy independent power producer programme on 6 June.

"My view is that it's firstly parliament, secondly Nersa and thirdly, the department of public enterprises - that's where the blame lies," Louw said.

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  • E=MC2 - 2012-06-11 11:36

    Eskom is probably going to be labelled a victim of apartheid now too... just like the police abusing a state slush fund is apartheids fault!

      Revelgen - 2012-06-11 16:15

      Yes, EVERYTHING is the fault of apartheid, for example the ANC deciding not to build new power stations, Cele signing leases for hundreds of millions more than actual cost, Selebi consorting with gangsters, municipalities that have got so bad after 1994 - ALL the fault of apartheid, not to mention degenerating hospitals and roads, plus a few hundred other things....

      Peter-Peter - 2012-06-11 16:25

      You know something? Before the ANC took over, Eskom had to keep a 10 year reserve/supply of electricity. Strange enough, but at the 10 year mark, they suddenly 'ran out' of supply. That is a CLASSIC example of people being put in place that know **** all about how to do their jobs.

  • marschoeman - 2012-06-11 12:03

    I still don't understand how they are able to justify a huge tariff increase because they need the capital, but then pay huge bonuses and declare huge profits. Should the money not be used as capital instead?

      Ryno - 2012-06-11 12:44

      cadre deployment stippulates that fat bonusses is part and parcel of the package, even tough you have no clue what you are doing ;)

  • antoinette.jordaan - 2012-06-11 13:25

    And the lack of maintenance is not Eskom's fault? The backlog created by that is not Eskom's fault? No? Oh. And as Jou_Ma says........why the big bonusses and profits? Use that.....

  • vusingwenya01 - 2012-06-11 13:35

    Leon Louw and the Free Market Foundation are spot on. A pity that the article is poorly written (Grammar and seems bits left out). The root cause of the electricity crises was/is the "failure" to implement or enable the 1998 Energy policy White Paper. I say "failure" generously as it was actually due to deliberate undermining of and sabotage of the decisions encapsulated in the White Paper by the SACP, its puppets and certain people within Eskom. As such the fault lies with the ANC for not disciplining its junior partner, the SACP, and ensuring that the policy was implemented. Instead the industry lapsed into a state of paralysis; it became half pregnant. This gave the centralist the opportunity to position Eskom and the continued existence of a vertically integrated monopoly, with victims as opposed to customers, as the only remedy. This in spite of the fact that IPP's would have been and are still able to implement more quickly and more cheaply than Eskom (without needing to be underwritten by the Treasury or by overcharging its victims for electricity in order to fund its balance sheet and the funding of what could be the most expensive power stations ever built). All we need is for the transmission grid to be separated in order to give them equal access to the grid and for customers to be allowed to buy from whom they choose (wheeling). Giving customers choice needs to be phased in over 3-5 years.

  • geoff.liddiard - 2012-06-15 09:28

    "My view is that it's firstly parliament, secondly Nersa and thirdly, the department of public enterprises - that's where the blame lies,"...... Parliament = ANC, NERSA = ANC, Dept of Public Enterprise = ANC so in reality who should we blame!!!!

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