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You’re going to create mining ghost towns‚ government warned

23 March 2018 - 06:00 By Ernest Mabuza
File photo.
File photo.
Image: Gallo Images/ iStockphoto

Eskom’s plan to sign agreements with 27 independent power producers (IPPs) will cause massive job losses and turn places where there are coal mines into ghost towns.

The plan‚ which government believes will attract billions worth of investment‚ is also not in line with the country’s energy requirements as there is an excess supply of electricity.

These were the submissions made by the Coal Transporters Forum in its application to halt the IPP deal.

While the date for that case has not been set down‚ the high court in Pretoria will on March 27 hear an urgent court application by Transform RSA and the National Union of Metalworkers of South Africa (Numsa) to stall the IPP deal.

Energy minister Jeff Radebe had intended to sign the power purchase agreements with 27 IPPs on March 13. But this did not happen because Transform RSA and Numsa went to court a day before in a bid to halt the process.

Numsa and Transform RSA wanted the court to interdict Radebe from signing the power purchase agreements with IPPs‚ pending the finalisation of the application by the Coal Transporters Forum. The court did not grant an interdict‚ but counsel for Radebe said he would not to sign the agreements until the urgent application was disposed of by the court on March 27.

In its application filed last year‚ the forum – which represents coal truck owners contracted to Eskom – wanted to stop Eskom from signing any power purchase agreements with IPP’s pending a decision by the National Energy Regulator of SA (NERSA).

In its affidavit‚ the forum said that electricity demand was stable and that Eskom’s own assessment indicated that the power utility would start to experience overcapacity from 2018.

“If further power purchase agreements are entered into‚ the overcapacity problem will only increase‚” Mpho Mokwana of the forum said in his founding affidavit.

Mokwana said the impending agreements came at a time when electricity consumption was showing a decline of 1% for 2016/2017 and when Eskom had announced a surplus of 5600MW‚ including an operating reserve of 2000MW.

“As a result of this electricity surplus‚ Eskom is procuring a kilowatt hour of electricity from the IPPs at 214 cents for what they can produce at 32 cents by using abundant and cheap coal.

“The kilowatt hour that is procured at 214 cents is sold for 86 cents by Eskom to the consumer. This has cost the economy R9 billion per annum until 2021.

“The IPPs will carry a contingent liability of R700 billion by 2020. This means government is providing guarantees to the IPPs to destroy jobs in the mining sector.” Mokwana said the unintended consequences of the IPPs were that Eskom would be forced to shut down at least Komati‚ Hendrina‚ Arnot‚ Camden and Grootvlei power stations and that there would be massive permanent job losses by Eskom and its associated suppliers.

He said a number of coal mines would close and towns in Mpumalanga and KwaZulu-Natal including Emalahleni‚ Ermelo‚ Newcastle and Piet Retief would be reduced to ghost towns.

Mokwana said coal transporters and mining suppliers‚ contractors and businesses in all these towns would be forced to retrench workers.

“The IPP must be slowed down to reflect the current electricity surplus and the fact that the electricity demand is declining.”

However‚ Eskom is opposing the application and has raised preliminary points that the court must deal with. The first is that the forum did not have standing to bring this application as it did not have any right that had been infringed.

Another point was that the application was abstract as there was no live controversy between Eskom and the forum.

Mninawe Xaluva‚ corporate legal specialist employed by Eskom‚ said in an answering affidavit that the forum members’ contracts with Eskom for the transportation of coal expired in March.

“Apart from the fact that the (forum) has failed to disclose this crucial fact to the court‚ the (forum’s) members do not have a right to a new contract with Eskom‚” Xaluva said.

He said the forum went to great lengths in showing that it wanted to make submissions to NERSA before the regulator could make any decision relating to the independent power producers.

“NERSA has already made a determination. The minister of energy in consultation with NERSA on 1 August 2011‚ 19 December 2012 and 18 August 2015 made the … determination that Eskom ‘must’ purchase electricity as a ‘buyer’‚” Xaluva said.

Xaluva said the Renewable Energy IPP Programme was conceived as a means to add additional capacity from various energy sources in order to promote the country’s obligations to decarbonise the economy and ensure security of supply.