Sound, fury but no light at Medupi

Despite bluster and threats, few take Eskom seriously any longer

“ESKOM is in control,” said the outgoing CEO, Brian Dames, at a media briefing this week. It was a bold statement from the head of the power utility that announced three emergencies in four months, the most recent of which was a week ago.

A less polite audience would have howled with laughter.

But the state-controlled energy monopoly has never been shy about making astounding statements, especially if they have no intrinsic meaning.

Remember Malusi Gigaba’s tubthumping threat that heads would roll if Medupi was not finished by the end of last year? It was not finished and heads did not roll. But it is not like we can vote with our feet and give our business to another power utility down the road.

Instead, the deadline for the completion of Medupi’s Unit Six, the one due to come “on line” first, was last year moved to the second half of 2014. This gives Eskom between six months and a year to get things under control at the patently out-ofcontrol construction site. Business is two years behind schedule there and about R30-billion over budget. The chaotic construction site had become synonymous with monthslong violent strikes, appalling standards of work, a devastatingly inexperienced workforce and good old, bog-standard corruption.

Eskom has since stepped into the fray by appeasing the unions with extra cash for their workers and playing referee in all disputes.

Nevertheless, relationships are still prickly on site and metalworkers’ union Numsa’s sector coordinator, Stephen Nhlapo, was unconvinced last month that contractors were playing fair — a depressing harbinger of more chaos to come.

So, it is not an enormous surprise that the “second half” completion date for Unit Six has moved to the “fourth quarter” — and it is prob- ably even less surprising that the big guns are starting to hedge their bets again.

That Unit Six would be completed this year was “reasonably achievable”, said Roman Crookes, Eskom’s MD at Medupi. And Eskom chairman Zola Tsotsi said last month: “We must make room for potential disturbances.”

But power analyst Chris Yelland said this week that it would take about six months from the date the unit was “completed” to become a fully functioning entity capable of producing 800MW of commercially accessible power.

Of course, Eskom did not need to make this little gem of information public because nobody would notice the power anyway. The meagre 800MW will be used to prop up the system while other generators are shut down for maintenance.

Another pearl that gets a lot of airtime from management is how Eskom has “kept the lights on” and “avoided load-shedding”. But anyone in an energy-intensive industry knows it is a fib. Sean Nel, spokesman for the Energy Intensive Users Group, said: “By hiding it [away from residential areas] people don’t know there is loadshedding going on.”

There is no doubt it is happening, though: Yelland said he believed it was a conscious decision to suffer the economic consequences of cutting back on energy-intensive industry rather than facing the political consequences of affecting domestic supply.

Tsotsi admitted that he had a political mandate to keep the lights on. Despite philosophical differences with Nersa, the energy regulator that gave Eskom an 8% tariff increase instead of the 16% it wanted, the team at the power utility had prevailed, he said, and the lights had stayed on.

In Eskom’s inimitable style, Tsotsi’s every word was monitored and weighed up by a squad of four spin doctors ready to step in and obfuscate anything that veered off the party line. I put it to Tsotsi that “keeping the lights on” in suburbia meant shutting down some industrial business.

“No, no, and that is the point,” said Tsotsi. “The point is we must keep the lights on without impacting the economy.”

But what about big industry — such as BHP Billiton’s aluminium smelter and the ferrochrome smelters that switch off their furnaces when the system runs into an emergency?

“That’s part of the special pricing agreement,” the spin doctors chimed in. (BHP Billiton buys its power at about half of what it costs Eskom to generate it. For this concession, BHP must switch off part of its production from time to time.)

In an ideal world, there would be enough power to keep the ferrochrome and aluminium smelters going.

“No, get this right . . . if we had had a 16% tariff increase from Nersa, we would be able to give everybody all the power they need,” said Tsotsi.

This is disingenuous. Extra cash would not help Eskom to build power stations faster. What would they have done with the extra money? “No. We would have been able to run the system the way we are now without it impacting our bottom line,” Tsotsi said.

The implication seems to be that had it got the extra 8% tariff increase, Eskom would have been able to buy back power — in other words, pay the energy-intensive users to shut down at least 10% of production.

Without this cash, Eskom has had to dig into its own “bottom line” to get the big users to slow down or to pay for the open-cycle gas turbines to stay on, consuming copious amounts of diesel in the process.

Needless to say, that approach would hardly have amounted to “keeping the lights on”. And if those big “energy-intensive users” were not able to get all the power they needed, well, then the economy would run at less than optimal levels — both in terms of creating jobs and spurring growth.

The ripple effects of blackouts at this level are incalculable: raw material deliveries cease, drivers are laid off, the woman selling vetkoek runs out of customers, and so on.

It is an alarming fact that growth is so slow that the demand for power is at 2007 levels.

It was a chicken and egg scenario, said Nel. If we made more power available, maybe we would be growing faster.

No wonder Brian Dames wants to see the back of Eskom.