Eskom interim group chief executive Sean Maritz told a Nersa hearing on Thursday morning that the utility’s top and senior managers will in future be subjected to regular lifestyle and conflict of interest audits.
Maritz was presenting Eskom’s application for a 19.9% average tariff increase for 2018/19 to the national energy regulator (Nersa’s) public hearing in Midrand.
This kicked off a programme packed with 16 presentations from stakeholders including the South African Local Government Association (SALGA) and various business and civil society groupings.
Maritz asked Nersa to assess Eskom’s tariff application on its merits and not place emphasis on negative information about Eskom’s governance in the public sphere.
He said Eskom was committed to freeing itself of ethics and governance failures.
He said the utility has suspended eight leaders, including four members of the executive committee due to recent governance failures. Eskom is mindful of governance and has improved its ethics and fraud policies, Maritz said. He said the whistleblowing system has been strengthened and senior officials will in future be subjected to independent lifestyle and conflict of interest audits.
This will include everybody from general manager level upward, which includes about 60 people.
Maritz gave the assurance that Eskom is not claiming revenue for costs related to the controversial McKinsey, Trillian and Impulse contracts.
Asked by the Nersa panel how he would respond to Eskom’s current difficult situation if Eskom was a private company, Maritz said he would immediately increase tariffs to a sustainable level. He would decrease operations to a level where it suited Eskom and couldn’t care if there was load shedding in KwaZulu-Natal, he said.
The panel did not take kindly to this response and told him to think it over and respond on Monday.
Eskom interim CFO Calib Cassim said 9.4 percentage points of the proposed 19.9% tariff increase was due to lower electricity sales. He said since the finalisation of the application, sales projections have been lowered even further. Nersa’s rules allow Eskom to adjust its application accordingly.
He said Eskom was aware that the provisions for Independent Power Producers could be reduced as some of the plants provided for will not be in operation during the application year.
Moneyweb has learnt that the further downward adjustment in demand could result in the application totalling 26% if all other elements remain unchanged. If the provision for IPPs is revised downward as well, the application could total 23%.
Eskom interim executive member for group capital Peter Sebola said Medupi was 85% complete and Kusile 82%. Eskom expects to complete the projects within the current budget.
Sebola said it would not be cost effective to stop construction on Kusile, as some stakeholders have suggested. He said stopping the construction of Kusile units 5 and 6 would save R3 billion to R5 billion immediately, but increase the cost of completion to R20 billion to R30 billion if the process is restarted at a later stage.
He said contracts with construction companies and suppliers have already been placed and stopping the process now would result in contractual penalties for Eskom and increase the total cost.
Willy Majola, interim group executive for generation, said Eskom’s reserve margin would only be big enough to place some power stations on cold reserve in 2019/20. This application applies only to 2018/19.
Cassim disputed the findings of the World Bank stakeholders earlier raised, that Eskom should operate with a staff compliment of 14 000. It currently has about 45 000 employees.
The hearing continues.