Government’s new plan for Eskom in a nutshell

Minister of Public Enterprises Pravin Gordhan has released a new road map outlining government’s plans for the future of Eskom.

Speaking at a press conference in Hatfield, Tshwane on Tuesday (29 October), Gordhan said that the company’s expenses were substantially higher than the revenue it generated from selling electricity.

This meant that it had to revise its cost structure to ensure a ‘just transition’ through a protracted, systematic and disciplined process.

Gordhan said that a key part of this process will be the separation of the power company’s key functions – including transmission and generation.


Transmission 

Gordhan said that government will spin-out Eskom’s transmission sector into a separate subsidiary under a general Eskom Holdings group.

This subsidiary will include the employees and structures which are responsible for transporting electricity from power stations to where they are required in South Africa.

He added that this subsidiary will have a buying component which will decide a day to day basis how much energy it wants to ‘buy’ from Eskom, whether it will use renewable power sources,  or if it wants to buy power from the private sector.

The minister said that the physical separation of this unit should take place by January 2020, while the final separation should take place by March 2020.


Generation 

Gordhan said that South Africa currently generates power from a number of stations but lacks competition, meaning it does not necessarily offer the best pricing.

To combat this, Gordhan said that government wants to form three clusters of coal-powered plants which will act as separate businesses that produce power as cost-effectively as possible.

He added that Eskom will also focus on building renewable plants and other forms of generation at a local municipal level.


Distribution

While government has previously reported that it plans to split Eskom into three units – transmission, generation, and distribution – Gordhan said that it was not feasible to give too much focus on the distribution arm at this time.

This is primarily because of the complexities involved and the need for more studies into how such a subsidiary would work, he said.


Rooting out corruption

Gordhan said that Eskom has been severely hampered by state capture and corruption, stating that the damage caused was ‘huge’ and ‘systemic’.

He said that this was more than stealing a few billion rands but rather a number of skilled people, particularly black professionals, were chased out of Eskom.  This all resulted in a negative impact on the power utility.

Gordhan said that his department and the power utility was working to root out this corruption.  To help this fight, he said that a new CEO will be announced for the company within the next week.

Gordhan said that finance minister Tito Mboweni would also provide an update on the bailouts being given to Eskom during his budget speech on Wednesday (30 October).

The power utility is currently facing a debt bill of R450 billion.


Just transition for old plants 

With a number of Eskom’s power plants reaching end-of-life, Gordhan said that Eskom was looking at possible uses for this infrastructure – including battery storage.

However, he acknowledged that the shuttering of these plants would impact both employees and the wider community, meaning a  ‘just transition’ was needed.

To this end, Gordhan said that Eskom was looking to establish a pilot project at one of these plants to ensure workers are reskilled, new jobs are created, and how communities can survive these changes.


Implementation 

Gordhan said that while these ‘ideas’ were great, they were nothing without implementation.

To this end, Eskom has established both a two-month and a year-long plan to ensure that the above process are implemented successfully.

Gordhan said that an executive within Eskom has also been appointed to oversee the successful implementation of the above ideas, while a separate monitoring group will help evaluate it.


Read: Why we can’t retrench: Eskom executive

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Government’s new plan for Eskom in a nutshell