Inquiry into the national electricity supply shortage and load shedding Presented to the Parliamentary Portfolio Committee on Minerals and Energy 28 May 2008

Contents Purpose and method of inquiry Main findings and conclusions Further investigations Key policy recommendations Impact of electricity supply shortage Questions

Purpose and method of inquiry To inform the Energy Regulator of the reasons for the electricity supply shortage resulting in the national load shedding of electricity and To recommend measures to be adopted to improve the electricity supply shortage and to reduce the adverse impact thereof. Methodology Questionnaires to 48 organisations categorised in 7 stakeholder groups; 50% responded and 38% provided information used in the inquiry; Eskom primary records and data analysed and followed up on. Process Eskom given opportunity to respond, response included as Appendix to report Report of Energy Regulator published on website (www.nersa.org) Media statement and public release on 20 May 2008

Main findings and conclusions (1) Generation plant availability High unplanned maintenance and load losses combined with the usual high planned maintenance of generating units during the period resulted in reduced generating capacity being available from 01 November 2007 to 31 January 2008. Poor coal quality, wet coal and low stockpile levels contributed to the unplanned generation plant outages and load losses in the period.

Main findings and conclusions (2) Response to electricity demand growth In previous load forecasts, Eskom had anticipated the current growth rate. However, the implementation of measures to provide for the growth has been inadequate and slow. In particular, there have been delays in returning the mothballed generation plant to service and the implementation of energy efficiency and demand management initiatives remain behind targets. Eskom’s new build programme is experiencing delays of at least a year.

Main findings and conclusions (3) Primary Energy Procurement Inadequate primary energy procurement and power station production planning impacted coal stockpile levels in the period. Coal stockpiles were allowed to decline to unacceptably low levels and there was a reluctance to obtain supplementary coal due to its high cost and its impact on Eskom’s financial position. Execution of load shedding Eskom was correct in declaring force majeure on 24 January 2008. Prior to load shedding, Eskom did use other emergency options such as demand market participation (DMP) and interruptible loads extensively prior to load shedding. Compliance: Current codes does not provide for long-term emergencies; Communication and coordination: distributors and customers caught unawares.

Further investigations (1) Obligations on Eskom to maintain coal stockpiles and reporting to NERSA. Whether some findings constitute a breach of legislation or licence conditions. Legal implications of load curtailment without the agreement from customers. Link between national load shedding and the recent failures of distribution plant in the Nelson Mandela Metro and the Ekurhuleni Metro. Continued export of power to SAPP countries under system emergencies.

Further investigations (2) Changes required to Eskom’s shareholder compact to prioritise security of electricity supply above Eskom’s commercial decisions in order to avoid national crises. Further investigation is also recommended in the following areas: Primary energy procurement and management and in particular coal management in Eskom. The availability, adequacy and optimum utilisation of Eskom’s generation plant in emergency and in view of the mid-life of these plants.

Key policy recommendations (1) The Government’s National Electricity Emergency Programme (GNEEP), including the Power Conservation Programme (PCP), should be coordinated and led by a centralised high-level government unit with authority to take action. The procurement of new private generation capacity, independent power producers (IPPs) and co-generation, should be managed and coordinated centrally by a professional entity independent from Eskom.

Key policy recommendations (2) There is a need for a national strategy to be developed by Government for the acquisition and management of coal to ensure security of supply. National Government should consider formulating a policy that will balance Eskom’s commercial decisions and the national security of electricity supply in order to avoid national crises. The role of Eskom in the Government’s National Electricity Emergency Programme should be clarified considering that Eskom has to focus, among others, on returning the system to normality and on its new generation build programme.

Impact of electricity supply shortage Major increase in Eskom’s fuel cost Insufficient base load plant (approximately 10 c/kWh) and excessive operation of gas turbines (180 c/kWh) even during off peak periods. Lower electricity sales Electricity sent out in period was 2.9 % below forecast Load shed account for 1.1%, balance due to other measures (demand management participation, interruptible loads) Economic impact of load shedding Cost to the economy of energy not supplied in period estimated at R50 billion (667 GWh at R75 per kWh).

Positive Impacts Customers have become more aware of power conservation and energy efficiency measures; Improved monitoring of licensees can be done by NERSA to minimise the impact of load shedding; Investigating Eskom’s winter plans Minimising delays in construction on new generating plant Identified improvements to Grid Code and NRS documents; Generation maintenance strategies Made customers more aware of future price increases; Communication between licensees and customers are continuously being improved upon.

END Questions

Correlation of load shedding with load losses and unplanned outages

New plant slip March 2008 vs NIRP2 plan Station March 2008 Plan Slip (m) 2008 slip (MW) Camden 31Oct 2007 22 190 Ankerlig 11 Mar 2007 14 Grootvlei 13 Mar 2008 15 565 Gourikwa 14 Mar 2007 Komati 31 Jul 2008 7 101 Gas 1 (Ankerlig) 14 Jan 2009 25 735 Medupi 30 Apr 2012 41 Gas 1 (Gourikwa) 27 Dec 2008 24 294 Bravo 30 Jun 2013 43 IPP OCGT 28 Feb 2010 Ingula 31 Mar 2012 3 DSMEE (2006+) 160 Total 856 2045

Month-end coal stock