Eskom fails to convince MPs on reasons for IPP deals delay

It is unlikely the long-delayed independent power producer (IPP) contracts for the supply of renewable energy will be signed before next year, parliament has heard.

The departments of energy and public enterprises and representatives from Eskom appeared before parliament’s energy committee to explain why the contracts, which have been awaiting signature for nearly two years, have still not been signed.

Former energy minister Tina Joemat-Pettersson said they would be signed by April, but new Energy Minister Mmamoloko Kubayi delayed the process, saying she wanted to speak to Public Enterprises Minister Lynne Brown first.

Deputy director-general for policy planning in the Department of Energy Ompie Aphane, however, told the committee there were six steps that needed to be completed first.

Brown said signing would happen once these were completed. Among the steps listed is the conclusion of the update of the Integrated Resource Plan to define the pace and scale of new generation capacity.

Aphane said this would be completed by February. They also still needed to approach the National Energy Regulator of South Africa (Nersa), which sets electricity tariffs, regarding “Eskom’s hardship”.

Aphane said the problem was that the projects resulted in a higher cost to Eskom than it could recover through tariffs paid by its customers.

Power produced by the IPPs was also no longer needed. Brown said it was contracts with IPPs in bid windows four and five that had been delayed.

The presentation states that the government risks litigation if the process is not resolved. Other risks listed include a potential sovereign downgrade, and market uncertainty, affecting investor confidence.

MPs challenged the presentation, saying it relied on old figures for the cost of renewable energy, and did not factor the cost of building new nuclear plants into its calculations.

IFP MP Jan Estherhuizen said the long wait in signing the contracts could cost the country R60-billion in investments.

DA MP Gordon Mackay said he did not buy Eskom’s sob story that IPPs were impacting its balance sheet.That was a result of years of mismanagement, he said.

“And Eskom wants to procure nuclear, but it says it can’t afford renewables which are far, far cheaper than nuclear.”

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