Eskom’s Stage 6 load shedding and the hidden costs

Eskom has started stage 6 load shedding, and electricity prices could go up if protesting workers get their way.

Under Stage 6, a total of 6,000MW needs to be shed from the grid.

Eskom chief executive André de Ruyter said the “leader faces the music even if he does not like the tune”.

“We want to be a responsible employer and pay employees fair wages,” he said, “but where, unilaterally and unlawfully, workers engage in illegal actions, it is unfair to lay the blame at the door of management.”

Eskom could not prevent the illegal action – the strike was unlawful in terms of electricity supply being classified as an essential service.

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Plus, he said, constant yearly increases would lead to electricity prices increasing “way above inflation”.

Energy economy specialist Lungile Mashele said there had always been a possibility of stage 6 load shedding, especially in winter, but what had brought the situation to this point was the wage dispute.

It is understood the strike action some of Eskom’s staff embarked upon was to demand a 15% wage increase.

On Tuesday, both the National Union of Mineworkers and National Union of Metalworkers of South Africa called “on workers at Eskom to normalise the situation, given that Eskom has returned to the negotiating table”.

“We are calling on our members to give this process and the Central Bargaining Forum meeting on Friday the necessary chance to settle the current dispute.”

Public Enterprises Minister Pravin Gordhan said everyone should be back at work on Wednesday, after an agreement was reached between Eskom and some unions.

The intimidation by some striking employees had been intense, he said, noting that “petrol bombs and other incendiary devices” had been thrown at the homes and vehicles of managers.

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Petrol bombs were also thrown at power stations, he claimed.

“This intimidation is completely unacceptable.”

Mashele said when Eskom had wage negotiations, a part of an increase requested from the National Energy Regulator of South Africa (Nersa) consisted of a number of things, including overheads of the job.

According to Mashele, if Eskom did not receive the increase, it would impact on how the utility budgeted and Eskom would not be able to afford certain increases.

She said if they sought to meet the salary increases requested, which were “three times above inflation rate”, it would have an impact on the price of electricity.

“There was a tabled increase put on line, which was not accepted, so the tariff increase they get certainly does affect their budgeting and therefore will affect what they can give out in terms of annual increases,” she said.

Mashele said an electricity price increase was always one of the issues Nersa raised at the end of the year when considering how “prudently” Eskom obtained all of their costs, such as coal, salary, primary energy costs and diesel.

If Eskom went ahead with salary increases, there was a “high chance” Nersa would not adjudicate in their favour in terms of “annual multi-year crises termination increase”.

“Nersa will argue to pay for such because it was way above what should have been paid.

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“Eskom’s tariff applications included the submission of documents to Nersa with labour costs and if it was deemed too high or out of benchmark, Nersa will tell Eskom they will not cover recover costs, impacting their tariff.”

Energy analyst Chris Yelland said Eskom’s price applications were linked to its costs and if the costs went up, Eskom would ask for more for electricity.

Staff remuneration was the second-biggest cost item after coal, and if Eskom was to grant the 15% increase, it would add several billions to its annual costs.

“We should remember, if this is done year after year, it makes a big difference to the cost structure,” he said.

“There is no doubt the 15% increase would put pressure on electricity prices in SA.”