How to fix Eskom: DA

A DA-run government would break the Eskom monopoly by subdividing it into separate generation and transmission units.

The opposition party presented its ‘Alternative Budget 2015/16’, ahead of the 2015 South African Budget Speech, to be delivered by Nhlanhla Nene, on Wednesday (25 February).

“It is unsustainable for 95% of our electricity to come from Eskom, a state-owned entity characterized by mismanagement. Our economy cannot grow without a stable power supply,” the DA said.

Eskom has been forced into constant load shedding since January, with the state owned enterprise admitting that there is no near end in sight.

It has been estimated that 10% of potential economic growth totalling R300 billion has been lost since 2008 due to electricity supply constraints.

A DA-led government would take the management of the national electricity grid away from Eskom and allow Independent Power Producers to compete alongside Eskom, which currently has a vested interest in crowding them out.

“In addressing the crisis at Eskom, it is important to acknowledge that a short-term solution to South Africa’s electricity supply shortages does not exist. Nevertheless, bold decision-making can no longer be delayed,” the DA said.

By subdividing Eskom, the DA said that both entities would remain largely or entirely state-owned, yet independent power producers (IPPs) would find a willing partner in an electricity distributor focused on procuring electricity from the cheapest, most reliable source, “not beholden to an indolent generator safely ensconced in its monopoly”.

“Private-sector managerial expertise and profit seeking will ensure efficiencies not associated with the current power utility,” it said.

“Indeed, Eskom’s generation unit may also choose to sell some of its aging assets to private investors. In this regard, it is also vital that the Independent System and Market Operator (ISMO) bill be reintroduced and fast-tracked,” the political party said.

The DA said that in the coming months, it will be imperative to keep Eskom solvent and avoid further downgrades of the company which will render both current and prospective debt obligations unaffordable.

Stabilising Eskom’s finances is a priority and the power utility will be given R23 billion to do so, President Jacob Zuma announced recently in his state-of-the-nation address to Parliament.

However, the DA said that prior to committing further funds to the struggling parastatal, some or all of the following key interventions should be considered:

  • Recovering monies from non-performing contractors for incomplete or delayed projects;
  • Removing duties from diesel used to fuel open cycle gas turbines;
  • The National Energy Regulator of South Africa (NERSA) should revisit current price determination via the Regulatory Clearing Account (RCA) mechanism;
  • Fast-tracking the gas utilisation master-plan (GUMP);
  • Increasing allocations to renewable energy projects;
  • Subsidising or incentivising solar panel installation to supplement the successful solar water heater programme;
  • Expanding co-generation procurement processes targeting entities which produce potential fuel sources as a by-product.

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How to fix Eskom: DA