The sky-high outages of the Eskom fleet: strike blamed

Cash-strapped power utility Eskom exceeded its budgeted use of diesel-fired open-cycle gas turbines (OCGTs) by more than eight times in June and in August (up to August 20) in an effort to keep the lights on.

This came as the unplanned outages of its own fleet rose to a staggering 16% in August, even higher than the 14.2% in June and 14.7% in July.

Eskom blames the situation on unprotected industrial action, but it was in a similar position early this year, according to an article by Mail & Guardian.

The OCGTs are designed to support Eskom’s generation capacity over peak demand periods and are typically run for two hours per day. Eskom has confirmed that it has been running them during the morning peak as well –  and, on occasion, even during the day.

Unlike previous years, Eskom has been utilising the OCGT peaker plants procured by the department of energy from independent power producers (IPPs) more intensively than its own.

Eskom OCGT load factor %	June	July	August (up to the 20th)
Budget	1.03	0.78	0.87
Actual	3.56	0.35	1.15

IPP OCGT load factor %	June	July	August (up to the 20th)
Budget	1.0	1.0	1.0
Actual	8.1	3.5	8.4

(Load factor is the percentage of time a technology is used against the total time it could have been used over a specific period.)

Excessive OCGT use has in the past cost Eskom billions that it was unable to recover from electricity tariffs through the regulatory process. In fact, early in 2016, Eskom spent more than R1 billion per month on OCGT usage as unplanned maintenance peaked.

Energy regulator Nersa has allowed Eskom a mere R28 million per month on average for the current financial year at a load factor of 0.5% to cover the cost of its own OCGTs and on average R191 million per month at a load factor of 1% for the OCGT IPPs. The IPP costs also include an availability fee.

If the highly geared Eskom cannot recover the excessive costs through Nersa, and it is doubtful it will, it would have to fund them from shareholder capital or loans.

In May this year, Eskom CEO Phakamani Hadebe told journalists that Eskom was performing well from an operational point of view. OCGT usage was contained until November last year, then seemingly started deteriorating, reaching a load factor of 3.82% in March.

Source: Eskom

To illustrate the devastating cost burden of increased OCGT usage, Hadebe’s numbers show that the cost increased to R158 million in March, compared to R9 million in September last year, at a load factor of 1.

If Eskom’s assertion that the poor performance since June is the result of union members’ actions during unprotected industrial action, it means the cost of the wage negotiations is much higher than meets the eye.

The National Union of Mineworkers (NUM) and National Union of Metalworkers (Numsa) have not signed the wage agreement that would give their members an increase of 7.5% in the first year plus a R10 000 settlement payment each. This alone adds an additional R1 billion to the current financial year’s wage bill.

They refuse to sign until Eskom gives an undertaking that it won’t pursue disciplinary action against the strikers who sabotaged the operations. Eskom is resisting this demand.

In the meantime, Solidarity, which has accepted the offer, is now saying that it cannot accept a situation where Eskom gives the undertaking to let the offenders go unpunished. Solidarity’s Deon Reyneke said the union would hold Eskom responsible for damage their members suffered on Eskom premises as a result of such action.

The high level of unplanned outages has led to a decreased space to do planned maintenance, which could once again set the utility’s operations on a downward spiral.

The utility targets 80% plant availability, with 10% out on planned maintenance (PCLF) and 10% on unplanned maintenance (UCLF).

Since June the numbers were:

		June	July	August (up to 20/8)
PCLF %	Actual	7.2	5.6	6.7
UCLF	Actual	14.2	14.7	16