South Africa’s Energy Regulator May Investigate Eskom Governance Failures

In their tariff application assessment and determination, NERSA, South Africa’s Energy Regulator also considered that Eskom conceded that certain governance failures occurred at the utility. NERSA points out that at the time of the application and assessment, the extent of the governance failures or amounts associated therewith had not been fully quantified.

The Energy Regulator may initiate its own investigation into the governance failures in Eskom and may effect adjustments to Eskom’s revenue based on the relevant outcome of its investigation and/or those undertaken by bodies or entities, including, but not limited to, Eskom, National Treasury, the Special Investigating Unit, the South African Directorate for Priority Crime Investigation (Hawks), the Parliament of the Republic of South Africa or any Commission of Enquiry as and when they are concluded or a conclusive outcome is reached and the costs associated therewith have been quantified.

The Energy Regulator further made several proposals to improve Eskom’s operational efficiencies. These include the following:

  1. To improve operational efficiencies, the Energy Regulator suggests that Eskom:
  • reduce costs and provide a plan within six months on cost cutting measures;
  • reduce unplanned outages and trips;
  • reduce water usage costs; and
  • develop a maintenance plan showing how it will execute maintenance.
  1. Eskom should improve the Energy Availability Factor (EAF) by reducing the unplanned capacity loss factor (UCLF) and effectively executing planned outages.
  1. Eskom should reduce the frequency of load shedding and provide plans on how security of supply will be ensured.
  1. Eskom should submit the details of units and plants that severely/adversely affect the EAF and put plans in place to address these within four months of the decision.
  1. Eskom should submit detailed plans on repairing major defects and design failures in the new-build plants (Medupi and Kusile) and reduce trips and other operational inefficiencies in these plants.

6. Eskom should consider the reduction/adjustment of the RAB value following the removal of plants/units        that:

  • are in an inoperable state;
  • are in cold storage;
  • have been offline for two years because they require significant refurbishment and equipment replacement; and
  • are new, but have to be re-rated based on performance, operational inefficiencies and major design failures.

Author: Bryan Groenendaal


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