Expect legal challenge if Eskom sticks with its irrational procurement course
Eskom is becoming a problem. It sells less electricity than it did 10 years ago, yet it employs 50% more staff, its coal costs have trebled, and its tariffs and revenues have increased fourfold. Now Eskom is blocking cheaper independent power producers (IPPs) and is attempting to mislead the government and the public by arguing that renewable energy and gas power are too expensive, and that Eskom should fast-track the procurement of nuclear energy. Eskom was a problem before, under apartheid. It served mainly white South Africans. And in the previous century, it was also not particularly efficient in building new power stations. There were cost and time overruns, and there were periods with unacceptably high increases in electricity tariffs. However, at the birth of our democracy, Eskom was in a sweet spot. It had surplus generation capacity, which was mostly paid for. Its short-run marginal cost of production was low. It entered into two multiyear price compacts with the government...
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