EDITORIAL: A high-stakes year for vacancy-riddled Eskom

Eskom’s electricity supply is spiralling down. In 2022 there was no load-shedding during January, a year later there has not been a load-shedding-free day so far. Even before economic activity was back in full swing stage 6 power cuts were needed to protect the country’s power generation system against collapse.

It is unlikely that energy supply will improve in the short term. Outages at Koeberg, Medupi and Kusile have removed about 4,000MW — equal to four stages of load-shedding — from the grid for a minimum of six months. Except for Kusile and Medupi,  the coal-fired fleet that is left is made up of ageing power stations that have struggled to maintain an output ratio of even 50% of installed capacity. It is safe to assume that 2023 will be even worse than 2022, which was the year with the most load-shedding on record.

To add insult to injury South Africans will have to stomach electricity tariff increases of 18.65% this year and another 12.74% next year.

Within this already stressed environment several important decisions must be made in 2023 and will determine whether the state-owned power utility will have any chance of pulling things back from the brink.

Recent high-level resignations leave the utility with more vacancies than active staff at the top level, and finding highly skilled and experienced people to fill these roles might be a tall order given the level of security risk that Eskom executives have been exposed to of late.

The number one job will be vacated by André de Ruyter in March. In April, its COO, Jan Oberholzer, who has worked for Eskom for more than 30 years, is going to retire.

A permanent appointment needs to be made for the position of head of generation, which was left vacant in May 2022 when Philip Dukashe resigned. Rhulani Mathebula, who acted in the role for about six months also left Eskom last year. Thomas Conradie, a power station manager who has been with Eskom for about 24 years, was appointed in his place as acting group executive for generation, but a permanent appointment must still be made.

It is critical for the future of Eskom that the chosen candidates are pragmatic rather than political appointments. As Standard Bank CEO Sim Tshabalala told Business Day this week, the ideal candidate for De Ruyter’s job, even if it means looking for someone beyond our borders, would require prior experience in running large power utilities and preferably a deep understanding of electrical and mechanical engineering.

It must, as Tshabalala said, also be someone adept at navigating SA’s complex sociopolitical and policy environment.

Decisions will have to be made about Eskom’s debt — both the debt owed by and owed to the utility. The National Treasury indicated, during the tabling of the medium-term budget policy statement in parliament in October, that it may shift as much as two-thirds of Eskom’s R396bn debt to its own balance sheet, with strict conditions. An announcement in this regard will be made when the finance minister tables the national budget in 2023.

When he presented its financial statements in December, De Ruyter said Eskom could not service the capital and interest costs to repay its debt on its own, and it was “absolutely critical” to receive financial support from the fiscus to enable the utility to continue to be a going concern.

Meanwhile, debt owed by municipalities to Eskom is expected to increase from R45bn in 2022 to R56bn this year, a burden, as Eskom CFO Calib Cassim rightly remarked, Eskom cannot afford to continue to carry.

Eskom is under a legal obligation, confirmed by a recent verdict issued by the Constitutional Court, to continue supplying nonpaying municipalities with power. To quote De Ruyter, this does beg the question, “who will service the debt?”

The December 2022 deadline for the legal separation of Eskom into three entities (generation, distribution and transmission) has come and gone.

The recent failure to award about 3GW worth of projects through the government’s renewable energy procurement programme because of a lack of grid capacity highlighted the urgent need to unbundle the transmission division within Eskom. Transmission investments are critical for transporting electricity from new generation projects to consumers and SA will need to put transmission in the most favourable position (away from the failing generation division) to raise that investment finance.

This will also be the make-or-break year for Koeberg’s life extension project. The plant’s operating licence expires in 2024 and certain upgrades, such as the replacement of the steam generators on both units 1 and 2, which are due to happen this year, are required by the National Nuclear Regulator to extend the operating life of the plant by 20 years.