EXPLAINER | Seven reasons why Eskom is in so much trouble

Eskom CEO André de Ruyter has warned South Africans this week that the risk of load-shedding “will abate over time but not disappear”.

“I’d like to remind the public that unfortunately the system is still very vulnerable, and just this weekend demonstrates it. We believed we had moved forward and we can have a look at lifting the load-shedding. We lost a number of units just over the weekend. The system remains unreliable and unpredictable,” he said.

Speaking at a “state of the system” briefing, he explained the myriad problems the electricity utility was dealing with.

Municipalities owe Eskom billions

Municipalities owe Eskom R35.2bn in unpaid bills. That amount would pay for nearly half a new Medupi power station (at the original budgeted cost of R79bn). Eskom CEO André de Ruyter said the utility was in the final stages of forming a partnership agreement with struggling municipalities to help them run their networks, install prepayment meters and collect revenue.

Its old power stations are near the end of their design lives

The average age of an Eskom “six-pack” — named for the number of generating units they have — is 40 years. “Most of our power stations are reaching the end of their useful lives, having had a hard life and being operated for an extended period of time well above international utilisation factors,” said De Ruyter. “This is further complicated by deferred maintenance and results in our power stations being not reliable and not predictable.”

Copper thieves are looting its cables

Eskom is “plagued” by theft and vandalism of its infrastructure. Copper theft costs the SA economy R5bn to R7bn a year. Eskom spends about R2bn a year replacing lost cables. “Infrastructure and electricity theft not only costs Eskom money but also creates risk to innocent people who are exposed to dangerous and vandalised installations,” said De Ruyter.

The defects at Kusile and Medupi mega-power stations will cost billions to fix

The inherent design defects at the new but long-overdue and over-budget Kusile and Medupi power stations will cost about R7bn to rectify, according to a 2019 Parliamentary Working Group report. Medupi was supposed to be completed in 2012, but only this year will the last of its six units come on stream. The Kusile project, which commenced in 2008, was expected to take six years to complete, but current estimates predict it will only be fully operational in 2023.

Illegal connections are rampant

Thanks to a culture of non-payment that reaches back to the apartheid era, Eskom loses billions in revenue every year. Illegal connections to the national grid place a heavy burden on transformers and other transmission equipment. De Ruyter said network overloading remained an area of great concern. “To protect our electricity infrastructure in certain high-density areas that have a high occurrence of illegal connections, Eskom continues to implement load reduction during peak times to prevent transformers being overloaded and exploding or catching fire.”

It can’t afford to upgrade all power stations to meet emissions standards

The electrostatic precipitators on some of the older power plants do not comply with new emissions standards. While some of the plants will get upgrades to emissions control equipment, bringing all Eskom’s power stations in line with the new standards would cost R300bn — “money Eskom clearly does not have”, said De Ruyter.

Phillip Dukashe, acting group executive for generation, said delays to implementing emissions upgrades could place 9,000MW at risk in the medium term. “Noncompliance with Atmospheric Emission Licence limits could lead to a short-term risk of 5,587MW,” he added.

It is saddled with debt

Eskom’s debt has ballooned to at least R464bn. Servicing its debt costs — R39.1bn in interest on the debt last year — has meant relying on government bailouts that amounted to R56bn in 2020/21 and R31.7bn for 2021/22, BusinessLIVE reported. The bailouts are aimed at stabilising Eskom while government separates it into three entities — generation, transmission and distribution — but it is still not clear how the debt will be spread out among the three units.