Former Eskom Group CEO and now Member of Parliament, Brian Molefe, together with former Transnet Group CEO, Siyabonga Gama, in Parliament. Picture: Supplied
Former Eskom Group CEO and now Member of Parliament, Brian Molefe, has charged that ordinary South Africans are paying through the nose for high coal prices not being negotiated along with more than R900 billion in guarantees for the Just Energy Transition (JET) technology.
“Coal is a resource God has put for South Africans as a birthright. We should use it to take people out of poverty. The price of coal should be revisited by regulation, but nobody wants to talk about that, including the guarantees of over R900bn for the JET that nobody wants to admit about. There are questions to ask but nobody is asking them," Molefe told Business Report in an interview yesterday in the aftermath of his inaugural presentation to Parliament on Eskom.
Molefe said the lack of storage capacity for Eskom-produced energy meant production for peak demand like the morning had to be kept going at a higher cost, even when the excess power the country produced meant it went to waste.
“Just like now it’s evening on a Sunday, there is not too much demand for power but Eskom production capacity still has to operate at peak because there are no batteries for the Eskom grid,” he said.
“If you meet the morning peak demand, you still have to keep the systems fired up. The price of coal has to be re-looked.”
He said with Eskom’s ongoing efficiency of stable electricity supply, which was achieved during his incumbency at the helm of the entity, it was apt to ask at what price the ordinary person was paying for coal.
“There has been a triple whammy of the Eskom price for coal, incompetency and the high use of diesel,” he said.
“The high price of coal is recovered from the consumer, it is the elephant in the room. Coal is a very big factor and nobody is asking questions, nobody is tinkering with the price of coal.”
In Parliament on Friday, Molefe questioned whether a prediction error of R8bn was acceptable or not, asserting it was “not a trivial matter and it cannot qualify to be called an error”.
“It is a fundamental error in estimation and points to a fundamental flaw in the revenue estimation model of Nersa,” he explained. “More importantly, it points to the fundamental flaw in the operating model of Eskom.”
The former Eskom CEO said it was well known that coal was Eskom’s biggest expenditure item.
“About 85% of energy comes from coal, by the amount of energy that is produced. However, by value, in rand terms, coal is about 90% in Nersa’s revenue determination mode. So if you tamper with any of the other things you are not doing anything and you have to go to the source, being coal.”
Molefe said that this meant that the price at which Eskom purchases coal had a direct bearing on Eskom’s cost and therefore, the price of electricity that the consumer pays.
He said Eskom should negotiate the price it paid on coal as a big customer.
“Eskom, as a large consumer of coal with numerous suppliers can negotiate in its favour the price at which it purchases coal,” he added.
“Eskom should not be a price taker in the coal industry but rather it should be a price maker. In reality, the opposite is true as Eskom officials rarely stand up to the bullying by rich mining companies who do not hesitate to use political and other methods of pressure to force exorbitant prices down the throat of Eskom officials,” he emphasised.
“The outcome of this is that the resultant high price of electricity is in fact a transfer via Eskom and Nersa of money from the clients of Eskom especially the poor to the rich coal-mining companies that feed their insatiable appetite for profit.
“To put it crudely, Eskom and Nersa are just conduits that extract money from poor South African citizens, who are surviving with minimum starvation wages to give to the rich mining companies.”
The R8bn approved by Nersa is in simple terms money that Nersa, as a conduit, will be taking from the poor working-class South Africans to give to the super-rich coal-mining companies to feed their thirst for profit, he said.
BUSINESS REPORT