Portfolio Committee Presentations, 2007

Purpose

Following a national outage on 18 January 2007, the Portfolio Committee invited Eskom to address it on:

• The course of the outages
• Why it was not anticipated
• The implications over the next few years
• Progress with regard to the generation of new electricity

Prof Anton Eberhard and the DPE were invited to respond to Eskom’s presentation.

Presentations

The Chairperson of the Eskom Board, Mr Valli Moosa informed the meeting that:

• Eskom is one of the biggest companies in South Africa, with the biggest capital expenditure outlay and contacts amounting to astronomical figures. In a company of such magnitude, practices have to occur within the realm of sound corporate governance. Eskom’s performance has been exemplary. 
• Eskom has not yet reached full capacity but is operating on a very narrow reserve margin. It is imperative that the public however knows that things are not out of control. A rapid response system does exist and the team in Eskom is very committed. When the outage occurred, people were working from 02h00 and they were able to ensure that the entire system was up and running before sundown, thereby avoiding a total black out.

In his presentation the outgoing Chief Executive Officer of Eskom, Mr Thulani Gcabashe indicated that:

• Good economic performance, a growing customer base and the fact that construction of new capacity started late has resulted in a decline in the reserve margin. The reserve margin is currently between 8-10% against a global benchmark of 15%.
• Eskom’s forecasting method takes change in the structure of the South African economy into account. A cone approach is used due to the high level of uncertainty and maximum demand forecasting is based on an hourly load model (HELM). Maintenance is informed by an annual optimisation workshop, weekly forecasted demand against available capacity, and accordingly scheduled during low demand periods.
• On 18 January 2007 Eskom’s Emergency Response Command Centre convened at 04h00 to manage the unplanned reductions and outages. Loadshedding commenced at 08h00 and by 11h09 the load restoration process commenced. Bulk supplies were resumed by 16h40. Eskom acknowledged that they could have alerted the public earlier and that they will improve their emergency communication to stakeholders.
• The build plan is on track.

Mr James Teledi from the DPE spoke briefly to a document on security of supply.

Prof Anton Eberhard from the University of Cape Town gave his perspective on South Africa’s electricity outages, stating that:

• The supply shortages were due to government preventing Eskom from building between 2001 and 2004 and the delay in the procurement of Independent Power Produces (IPPs).
• A clear electricity security standard needs to be established; electricity planning should be transparent, and better co-ordinated and integrated; the investment approval and licencing processes should be streamlined; and private participation (30%) in generation capacity should be facilitated.

Conclusion

The Portfolio Committee sought clarity on issues of staff morale, solar and wind energy, SMME participation in the build programme, local benefits from the build programme, quality assurance mechanisms and the duration of the ‘tight’ period. These were adequately responded to by Eskom.

Mr Moosa also explained that the terms of the Power Purchase Agreement with IPPs were under discussion; and that Eskom needed them to display an element of entrepreneurship and not place the entire burden of risk on the State.

It was agreed that within 7 days:

• Eskom would provide the Portfolio Committee with a written response to Prof Eberhard’s presentation, and
• DPE would provide a proposal on how planning can be better integrated and proposals on how government (possibly through procurement) could encourage businesses to be more energy efficient.