Eskom rescue plan revealed
30 October 2019 | Web Article Number: ME201916989
ESKOM cannot remain in its current structure and the business model needs to be changed to eventually reach a stage where the country will have a stable electricity supply.
That was the message from Public Enterprises Minister Pravin Gordhan, briefing the media in Hatfield in Tshwane yesterday, after releasing a Special Paper on how government plans to rescue the ailing power utility.
The paper details plans to separate the transmission component of Eskom into a subsidiary of Eskom Holdings by March next year, while the generation component will be divided into three clusters to create intra-company competition.
This comes after President Cyril Ramaphosa announced in his February 2019 State of the Nation Address that to improve operational efficiency, Eskom would be unbundled, and that transmission, generation and distribution would be separated into three subsidiaries.
“Eskom cannot remain as it is. Energy is absolutely crucial to this economy and to the households in South Africa. We have to have a reliable energy for South Africans, whether they are in business, or households or students who are busy with their exams,” Gordhan said.
He added that in implementing Eskom’s roadmap to sustainability, some processes would happen rapidly, and cautioned that some would take time to achieve.
He said Eskom’s journey to the future was dependent on the resource plan that Mineral Resources Minister Gwede Mantashe has presented to Cabinet.
The second component will be generation. Currently, Eskom generates power through 15 to 16 power stations.
Eskom’s generation will retain its current fleet and each power station will have a Power Purchase Agreement per plant with the transmitting subsidiary.
“What it lacks as a monopoly is competition. And as a result of the lack of competition, we do not get the most effective pricing on the… generation side. So the proposal that government will be exploring with Eskom is the creation… of three clusters of coal-powered plants…
“Let’s say there are five or six power stations in each cluster. Each cluster will act as a business and that business must produce power as cost effectively as possible so that you as consumers, or businesses as consumers, get the lowest possible price that is available,” Gordhan said.
He said even more importantly, this will create intra-company competition between the Eskom generating facilities. This kind of intra-company competition, he said, is good for business and for consumers and creates better efficiencies into the generating processes.
“Thirdly, we have to resolve the operational issues. At the same time, we need to shift towards a new business model and create a transmission entity and the generation clusters that we are talking about and resolve some of the cost issues within Eskom itself whilst looking at the matter with the new leadership within Eskom and the resolution for the debt issues,” he said.
Under the transmission subsidiary, the 5 000 to 6 000 employees who worked in this area would be responsible from transmitting electricity from the power stations to where they are required in South Africa.
On the appointment of the new CEO, Gordhan said the Eskom board had done its work and that hopefully, an announcement would be made in the next week or so.