Light fin­gers

Eskom’s short-sight­ed­ness means users pay twice the le­gal limit as power theft bites

Finweek English Edition - - Openers -

IT’S DIF­FI­CULT – prob­a­bly im­pos­si­ble – to put a pre­cise fig­ure on the rev­enue Eskom’s los­ing to elec­tric­ity theft and non-pay­ment. But what is in­dis­putable is that Eskom’s skills crunch and poor dis­tri­bu­tion chan­nels have com­pro­mised its ca­pac­ity to de­tect and stem the grow­ing num­ber of il­le­gal res­i­den­tial and in­dus­trial con­sumers con­nect­ing to its grid. The net re­sult? Legally con­nected con­sumers are pick­ing up the tab and sub­si­dis­ing thieves and non-pay­ers.

A re­cent re­search re­port by en­gi­neer­ing con­sul­tant Chris Yel­land for the South African Na­tional En­ergy As­so­ci­a­tion (SANEA) stated that Eskom’s fail­ure to rein in elec­tric­ity theft and non-pay­ment cost the power util­ity around R5,3bn in lost rev­enue last year.

Yel­land’s re­search showed that al­most 3 600MW – equiv­a­lent to the out­put of a ma­jor coal-fired power sta­tion or about 10% of the cur­rent na­tional de­mand of around 36 000MW – wasn’t ac­counted for by the pub­lic cor­po­ra­tion and its dis­trib­u­tors and was most prob­a­bly si­phoned off the na­tional grid.

Says Yel­land: “That fig­ure tal­lies with the one in Eskom’s fi­nan­cial re­port – ex­cept the com­pany chose to clas­sify theft and non-pay­ment un­der ‘non­tech­ni­cal losses’ in its re­port.” Non- tech­ni­cal losses re­fer to un­ac­counted for elec­tric­ity that got “lost” some­where along its dis­tri­bu­tion chan­nels or was for some rea­son not ac­counted for.

Maboe Maphaka, Eskom’s cor­po­rate man­ager re­spon­si­ble for mon­i­tor­ing losses to theft, has dis­missed the re­port as sen­sa­tion­al­ist, ar­gu­ing that SA isn’t worse off than other coun­tries. Says Maphaka: “Eskom’s non­tech­ni­cal losses at 7% are fairly low when one fac­tors in the global in­dus­try av­er­age of 10% to 15%. The bot­tom line is that we aren’t a law en­force­ment agency but in the busi­ness of pro­vid­ing elec­tric­ity.”

But the eco­nomic ef­fects of power theft have in some cases seen le­gal users pay­ing al­most twice above their le­gal limit. Most telling for Yel­land is the fi­nan­cial im­pact of elec­tric­ity theft on SA’s pro­duc­tive econ­omy – more so, given the cur­rent en­vi­ron­ment of se­vere gen­er­at­ing ca­pac­ity short­ages.

Says Yel­land: “If we’re se­ri­ous about ad­dress­ing this coun­try’s eco­nomic growth chal­lenges we not only need to grow ca­pac­ity but we also need to ad­dress the flawed dis­tri­bu­tion chan­nels.”

Ronel Ober­holzer, se­nior econ­o­mist at re­search group Global In­sight, sup­ports Yel­land’s view. She says power ra­tioning im­posed by Eskom on 138 of its top en­ergy con­sumers – in­clud­ing gold and p l a t i num pro­duc­ers An­gloGold Ashanti, Gold Fields and Har­mony – could po­ten­tially knock off 0,3% of GDP growth for this year, while the 6% growth tar­get by 2014 could be missed by 0,4%.

Sim­ply put, were it not for theft and a per­me­at­ing cul­ture of non-pay­ment among con­sumers, Yel­land says SA wouldn’t be ex­pe­ri­enc­ing a power gen­er­at­ing ca­pac­ity cri­sis or elec­tric­ity cuts. The trou­ble is, Eskom’s large ver­ti­cally in­te­grated ac­count­ing sys­tems and in­ad­e­quate rev­enue pro­tec­tion prac­tices can’t de­tect those anom­alies, Yel­land says. “The scale of elec­tric­ity theft and non-pay­ment in SA has been caused by man­age­ment’s com­pla­cency and ne­glect over many years.”

To which Maphaka re­torts: “While agree­ing with some of the find­ings of Yel­land’s re­search, the view that man­age­ment is mostly to blame for elec­tric­ity theft and non­pay­ment is overly sim­plis­tic. We all know it’s easy to sen­sa­tion­alise such a re­port but that isn’t a true re­flec­tion of the sit­u­a­tion on the ground.”

While ad­mit­ting that Eskom is bat­tling a ris­ing tide of ca­ble theft, Maphaka says it’s spending mil­lions to strengthen se­cu­rity at most of its sub-sta­tions in out­ly­ing ar­eas – usu­ally the source of il­le­gal con­nec­tions.

Hugh McGib­bon, Eskom’s GM: Dis­tri­bu­tion, re­in­forces that view, say­ing that steal­ing elec­tric­ity now in­volves or­gan­ised crime. Even more chal­leng­ing, says McGib­bon, is the fact that some large-scale sug­ar­cane farm­ers in ar­eas close to KwaZulu-Natal’s Tugela re­gion have em­braced the scourge. Says McGib­bon: “I had first-hand ex­pe­ri­ence of elec­tric­ity theft when I was GM for a dis­tri­bu­tion com­pany in the KZN re­gion.”

In town­ships such as Soweto and Tem­bisa, McGib­bon says Eskom is fight­ing much more so­phis­ti­cated elec­tric­ity crime syn­di­cates. “From our ex­pe­ri­ence in most of those trou­ble spots, it’s only fair to sug­gest that elec­tric­ity theft and non-pay­ment are more of a so­cial prob­lem than a man­age­ment ca­pac­ity is­sue.”

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