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Did Eskom cause load-shedding on purpose?

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The Organisation Undoing Tax Abuse (Outa) has set the cat among the pigeons in its claims that the load shedding of 2008 and 2014 was ‘self-inflicted’ by Eskom. Not only does Outa believe load shedding was avoidable, but that “corrupt practices” exacerbated the situation.

Load shedding EskomAccording to Outa’s Portfolio Director for Energy, Ted Blom, who used to work for Eskom, the initial round of load shedding in 2008 was the result of the utility seeking to play hardball with suppliers who were holding Eskom “hostage”, while 2014’s load shedding was the result of poor maintenance. The public was made aware that maintenance issues were the reason for the load shedding, and were told that maintenance needed to be done urgently. What South Africans didn’t know, Blom says, is that many major repair works were simply left unfinished for years before.

In addition, some industry observers have suggested that the load shedding, which led to the increasing electricity tariffs we have seen over the past few years, was a first step on the road to the nuclear deal. By destabilising the country’s power supply, and incurring massive costs for maintenance and the building of the Kusile and Medupi power stations, Eskom was able to make the case for nuclear power far more attractive.

Outa is finalising an extensive report into Eskom’s business practices, to be presented to Parliament’s Public Enterprises Committee. The organisation has also stated that the average four-person South African household should pay R290 a month for electricity, yet Eskom is charging them roughly R1 200.

“There are three cost drivers to the power utility. They include the financing costs of money borrowed, their power plants and the operations. Only Eskom’s operations were subject to inflation, so increases should be a third of inflation, as two-thirds of costs were fixed. On the assumption Eskom was efficient in 2005, and the cost of electricity for a four-person home was R160, the cost now for electricity, based on an annual escalation of a third of Consumer Price Index, would be R290,” Blom told Nersa.

Eskom is seeking a 20% tariff increase from Nersa, but Blom says Nersa should, and could, dramatically reduce the electricity tariff. Nersa spokesman Charles Hlebela told the media that Eskom’s application would be considered in terms of the law.

Parliament’s Public Enterprises Portfolio Committee is preparing to conduct an enquiry into the state of Eskom’s financial and operational affairs, but has moved the date out to “leave no stone unturned”. The Committee’s acting Chairperson Daphne Rantho said that it is not a “straightforward process”, and that it is important for the Committee to engage with experts and organisations that have done some work on the state capture phenomenon. “Looking at the sensitivity of the issues, we thought we do not want to do this as a by the way issue,” she added.

With the many accusations levelled against Eskom, Outa’s assertions are a drop in the ocean of alleged malpractice. While South Africans are interested in discovering – and recovering – the millions of Rands claimed to have been misspent by the Utility, the fact that they are being over-charged for electricity usage will be the issue the public will have the biggest interest in. However, in light of Eskom’s financial troubles, it’s unlikely that tariffs will change.

Image credit: Copyright: prapann / 123RF Stock Photo

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