Issue 140, Feb 2025

Roundup of major energy and electricity news and developments: 20 January to 2 February 2025

1. NERSA approves 12.7% price hike as Eskom declares R17.8b interim profit.

2. Eskom announces load shedding two days after adverse electricity price decision.

3. Shock report to Parliament by the Auditor General on the state of Eskom.

4. Probe initiated into the SA Bureau of Standards amid corruption allegations.

5. Discovery Green secures multiple wheeling agreements for renewable energy.

6. South African airports grapple with fuel and power supply challenges.

7. R3.7b gas-to-liquids plant refurbishment deal with Russian bank on verge of collapse.

8. South Africa's national transmission company launches pilot project to modernise grid.

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1. NERSA approves 12.7% electricity price hike as Eskom declares R17.8b interim profit.

South Africa's National Energy Regulator, NERSA, approved a 12.7% average electricity increase for Eskom for the 2025/26 financial year, effective from 1 April 2025. This decision grants Eskom only a third of the 36% hike it had initially requested. For the subsequent financial years, NERSA has sanctioned increases of 5.36% for 2026/27 and 6.19% for 2027/28. The regulator's decision follows public consultations where concerns were raised about the country's weak economy, the prevailing cost-of-living, and the impact on citizens, business and industry. In a related development, Eskom reported a profit after tax of R17.8n for the six months ending 30 September 2024, a significant increase from the R1.6b profit recorded during the same period last year. This improvement is attributed to enhanced operational performance and a government bailout. Despite these positive financial indicators, Eskom faces challenges due to the approved price increase being significantly lower than requested. The utility had cited the need for higher tariffs to manage coal contracts, increased carbon taxes, and rising municipal arrear debt. The government has expressed its commitment to working with Eskom to achieve efficiency gains to mitigate the impact of the lower-than-requested tariff increases. While the 12.7% electricity price hike is lower than the 18 to 20% that some analysts had expected, it is still about 3x the current inflation rate, but much lower than an increase of 9x the inflation rate that Eskom wanted. The interplay between tariff adjustments, Eskom's financial health, and the country's energy stability continues to be a focal point for both policymakers and the public. 

2. Eskom announces load shedding two days after adverse electricity price decision.

At 06h00 on Sunday 2 February 2025, Eskom announced the suspension of load shedding in South Africa, citing the sufficient replenishment of emergency reserves. With unfortunate timing, Eskom had announced the return of Stage 3 load shedding on Friday 31 January 2025, just two days after NERSA approved a 12.7% electricity price increase. This marked the first scheduled power cuts in over ten months. Eskom attributed the need for the nation-wide power cuts to a “perfect storm” of events, including the breakdown of six units at two key power stations, delays in returning units to service, and ongoing maintenance. These issues apparently led to the depletion of emergency reserves, necessitating power cuts to replenish them. The utility emphasised that this is a temporary setback and that the trendline is moving in the right direction. Eskom's Group Chief Executive, Dan Marokane, stated, “Over the past seven days, we have experienced several breakdowns that require extended repair times. This has necessitated the use of all our emergency reserves, which now need to be replenished over the weekend.” Energy & Electricity Minister Kgosientsho Ramokgopa described the return of nation-wide power cuts as a “temporary setback” and expressed optimism about ending electricity outages. The utility stated that it will provide updates if any significant changes occur. The recent tariff decision by NERSA, which granted Eskom a 12.7% increase instead of the 36% requested, has raised concerns about the utility's financial sustainability and its ability to maintain infrastructure. There have even been suggestions that the latest round of power cuts is linked to the recent adverse electricity price increase announced by NERSA. However, there appears no evidence or substance to such suggestions.

3. Shock report to Parliament by the Auditor General on the state of Eskom.

In a recent report to Parliament, the Auditor-General of South Africa (AGSA) has raised alarm over Eskom's financial and operational challenges. AGSA emphasised that tariff hikes alone are insufficient to ensure Eskom's sustainability, highlighting deep-rooted issues within the organisation. A significant concern is the rampant issue of “ghost vending”, where counterfeit prepayment electricity tokens are sold, leading to substantial revenue losses. Eskom has acknowledged that approximately 1.8-million prepayment meters are vending electricity without proper payment. With an estimated average consumption of 500 kWh per month at R2.50 per kWh, this translates to an annual revenue loss of about R27b. The AGSA's report indicates that this fraud originates internally, involving staff with high-level access to the generation of encrypted codes for prepayment electricity tokens. This internal breach has fostered an illegal ecosystem of ghost vendors, effectively funded by law-abiding customers who bear the brunt of increased tariffs. Historically, the costs associated with ghost vending have been passed on to consumers, whereas NERSA is mandated to permit only efficiently and prudently incurred costs to be transferred to customers. Eskom has always has the necessary tools to identify and address suspicious consumption patterns resulting from meter tampering and ghost vending, but up to now has neglected to do so. As Eskom undergoes unbundling, these losses are becoming more transparent within the ring-fenced financials of Eskom Distribution, making them increasingly difficult to conceal or ignore. The AGSA report calls for decisive action from both NERSA and National Treasury to enforce reforms, enhance efficiency, and root out fraud and corruption within Eskom. “Tough love” may be necessary from both the shareholder and the regulator to compel Eskom to address its systemic issues and restore financial and operational integrity.

4. Probe initiated into the SA Bureau of Standards amid corruption allegations.

Trade, Industry & Competition Minister Parks Tau has announced an independent investigation into the South African Bureau of Standards (SABS) following multiple whistleblower reports alleging financial mismanagement, bullying and cover-ups within the organisation. The investigation, set to commence in early February, aims to address concerns about the SABS's governance and operational integrity. Minister Tau emphasised the importance of the probe, stating, "We have corresponded in that regard with the SABS that we would investigate in detail the allegations." The SABS has faced a series of challenges, including the loss of accreditation due to governance and system failures. Acting CEO Lizo Makele acknowledged these issues, noting that while existing clients remain unaffected, the bureau cannot issue permits bearing the South African National Accreditation System (SANAS) logo for new clients or additions of scope. In response to the allegations, the SABS has denied any wrongdoing. In a statement, the bureau asserted, "After thorough internal reviews, we categorically state that these claims are baseless, lack context and are not supported by any credible evidence." Various political parties and stakeholders have welcomed the investigation, highlighting that it comes after months of pressure. DA spokesperson Toby Chance emphasised the need for transparency, stating, "The DA remains committed to holding all DTIC-affiliated entities to the highest standards." As the investigation unfolds, stakeholders and the public await its findings, which are expected to shed light on the depth of the issues within the SABS, and guide necessary reforms to restore its credibility and functionality.

5. Discovery Green secures multiple wheeling agreements for renewable energy.

Discovery Green has recently finalised five wheeling agreements across the resources, property and hospitality sectors. This despite Eskom Distribution’s announcement that Eskom will institute a court action challenging NERSA’s decision to grant trading licences to several electricity traders, including Discovery Green. The wheeling agreements aim to supply clean, wheeled electricity to various industries, underscoring a collective commitment to sustainability and carbon footprint reduction. In the resources sector. Impala Platinum Holdings Limited (Implats) has entered into a five-year power purchase agreement (PPA) with Discovery Green to supply renewable energy to its Impala Refinery in Springs, Gauteng. This initiative is set to provide 90% of the refinery’s electricity needs from renewable sources by 2026, aligning with Implats' goal of achieving a 30% reduction in carbon emissions by 2030. The property sector sees Fortress Real Estate Investments concluding a ten-year wheeling agreement with Discovery Green. This deal will supply renewable energy to 14 of Fortress's Eskom-supplied properties, potentially increasing renewable penetration levels to up to 100% in these specific buildings. This move is a critical component of Fortress's strategy to achieve its 2030 decarbonisation targets. In the hospitality sector, Capital Hotels and Apartments has signed a 15-year agreement with Discovery Green to supply 5000 MWh of renewable energy annually to three of its properties. This partnership not only reduces the carbon footprint of these establishments but also sets a precedent for sustainable practices within the hospitality industry. These agreements collectively represent a significant step toward a more sustainable energy future in South Africa. By integrating renewable energy into their operations, these companies are not only advancing decarbonisation efforts but also positioning themselves for competitiveness in a low-carbon economy.

6. South African airports grapple with fuel and power supply challenges.

South Africa's major airports are currently facing significant operational challenges due to fuel shortages and power disruptions. A fire on 4 January 2024 at the National Petroleum Refiners of South Africa (Natref) refinery – responsible for supplying approximately 72% of the jet fuel for Johannesburg's OR Tambo International Airport – led to a scare over potential jet fuel supply shortages, and concerns about potential disruptions to flight schedules. In response to the pending crisis, transport Minister Barbara Creecy convened an urgent meeting with key stakeholders, including the Airports Company South Africa (ACSA), the Fuel Industry Association of South Africa (FIASA) and Sasol. As a result, the airport managed to secure 121.1-million litres of jet fuel, ensuring continuity of operations until Natref resumes production in late February. Transport Minister Barbara Creecy emphasised the importance of proactive measures, stating, “We are committed to ensuring that our airports remain fully operational. This collaborative effort demonstrates our ability to address challenges swiftly and effectively.” Concurrently, Cape Town International Airport is experiencing power disruptions due to damaged cables impacting the airport's fuel depot and causing flight delays. Generators were deployed to restore operations temporarily, and refuelling has since resumed. ACSA confirmed that flight schedules were affected and advised passengers to contact airlines for updates. These incidents highlight the vulnerabilities in the infrastructure of South Africa's key airports. Industry experts suggest that diversifying fuel sources, increasing storage capacities, and enhancing power supply resilience are essential steps to mitigate future disruptions. As operations continue, stakeholders remain vigilant, monitoring the situation closely to ensure sustained service and operational stability.

7. R3.7b Mossel Bay G2L plant refurbishment deal with Russian bank on verge of collapse

The $200m (R3.7bn) agreement between South Africa’s state-owned petroleum company, PetroSA, and Russia's Gazprombank, to refurnish PetroSA’s gas-to-liquids (G2L) refinery in Mossel Bay is on the brink of collapse after the Russian bank failed to fulfil its financial commitments. Internal documents reveal that Gazprombank did not provide the necessary project funding guarantees and a promised $3m (R56m) for a feasibility study. The deal, announced in December 2023, aimed to restart the refinery, which has been inactive since 2020 due to depleted gas feedstock. Gazprombank’s pending withdrawal has left PetroSA seeking alternative partners to revive the facility. Critics have questioned the initial selection of Gazprombank, noting that the bank’s bid scored only 40 out of 100 points, placing it third among contenders. Despite this, political intervention ensured that Gazprombank was selected for the contract, raising concerns about the integrity of the procurement process. The imminent collapse follows the earlier withdrawal by TotalEnergies as developer for promising natural gas discoveries off the southern Cape coast of South Africa that would feed natural gas to the G2L plant. Energy analysts are now debating the feasibility of ever refurbishing and returning the refinery to service. Given the apparent collapse of the Gazporombank deal, and the lack of a viable natural gas supply for the G2L plant, some argue that investing in returning the plant to service would not be prudent. “Even if you have the money and a competent financial and technical partner, if you don’t have a gas supply, it is a problem”, said one. The sorry saga underscores the challenges PetroSA faces with competent procurement, contracting and securing of viable partnerships, and the broader question of South Africa’s strategy in building and managing its liquid fuels and gas infrastructure.

8. South Africa's national transmission company launches pilot project to modernise grid.

The National Transmission Company of South Africa (NTCSA) has announced the initiation of a pilot project aimed at integrating private sector participation into the expansion of the country's transmission network. This move is part of a broader strategy to expand and modernise South Africa's power grid and enhance its capacity to accommodate renewable energy sources. Historically, underinvestment in transmission infrastructure has posed significant challenges. Between 2012 and 2024, Eskom managed to install only 4300 km of transmission lines, averaging about 330 km per year, with only 74 km constructed in the 2023/24 financial year. This falls far short of the 1400 km per year required in Eskom’s 10-year Transmission Development Plan to meet the country's growing energy needs. The NTCSA's pilot project seeks to address these challenges by leveraging private sector investment and expertise. By involving independent power transmission projects, the initiative aims to fund and accelerate the development of critical transmission infrastructure, including new and upgraded 275 kV, 400 kV and 765 kV transmission corridors, lines, substations and transformers, ensuring a more resilient and efficient power grid. This approach aligns with the government's broader energy strategy, which emphasises the importance of public-private partnerships in overcoming financial and operational constraints. Deputy President Paul Mashatile has highlighted the necessity of private sector involvement in sectors like energy and infrastructure to drive economic growth and stability. As South Africa continues to grapple with energy challenges, the NTCSA's pilot project represents a proactive step toward modernising the nation's power grid. By fostering collaboration between public entities and private investors, the initiative aims to build a sustainable and reliable energy future for the country.

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