[imagesource: Moneyweb]

Four days into February and we have yet to be load shed.

Could February be the sort of month January wishes it had been, with alcohol sales, beach days, and an uninterrupted supply of electricity?

Only time will tell, but even if the lights do remain on, the long-term prognosis for Eskom remains dire.

The words ‘death spiral’ have been used in conjunction with the state-owned enterprise for a while now, and last year Eskom’s CEO, André de Ruyter, even joined in the fun.

This time it’s the Institute of Race Relations (IRR) sticking the knife in, with a statement issued earlier in the week titled, you guessed it, ‘Eskom is in a death spiral‘.

The statement refers to reports like this one from News24, detailing how Eskom wants South Africans with solar panels to pay more for electricity

The IRR is not impressed:

A utility such as Eskom enters into a death spiral when customers use less of its product. The utility then raises prices to recoup the revenue lost through lower sales volumes. The higher prices incentivise more customers to use less of the utility’s product. This self-reinforcing cycle continues indefinitely, with state bailouts keeping the utility afloat, until it changes tack…

Eskom has to change tack. It has to start by recognising that prices cannot be raised indefinitely, because doing so only makes things worse. It has to stop increasing tariffs and start stemming the financial losses by cutting costs and increasing its woeful operating efficiency…

Said John Endres, IRR Chief of Staff: “It is time to stop the Eskom death spiral. Give #PowerToThePeople by implementing drastic reform policies such as the IRR’s Eskom Recovery Plan. Reward customers for using less electricity and generating their own supply instead of punishing them. Open the electricity generating market to competitors and let Eskom prove its competitiveness on a level playing field.”

Ha, Eskom on a level playing field would be butchered by any half-decent business.

Another fun story – Eskom spent R840 million building flats for construction workers at its Kusile power station, but more than nine years later, the project remains incomplete and the units are uninhabitable.

The budget for the development project was originally R160 million, but it ballooned a tad, and workers now travel as many as 50 kilometres a day to work at Kusile.

In a statement to MyBroadband, Eskom refuted that it is “punishing consumers who generate their own electricity from renewable sources”:

The statement that Eskom seeks to charge those with solar panels more than other consumers is misleading and based on a poor understanding of the facts. The facts of the retail tariff plan application currently before the National Energy Regulator of South Africa (NERSA) are such that, if approved, the benefits to the consumer are significant…

Most domestic customers who install solar installations opt for so-called “grid-tied” options, which means that the cost of the battery system is reduced significantly by allowing the user to access Eskom power when the sun does not shine and the battery has run down.

To enable this access to the grid, Eskom has to maintain an extensive infrastructure to be accessed on demand. The new tariff structure will ensure that the cost of maintaining this infrastructure is recovered, while still allowing the customer to benefit from their solar installation.

You can read the full statement here.

It’s tough not to have sympathy for current CEO André de Ruyter, who has been handed a corrupted, poisoned chalice, but he knew what he was getting himself in for when he took the gig.

And still, we wait for criminal action to be taken against those who led us to this point.

[sources:irr&mybroadband]