OUTA aims to unbundle Eskom

The complaint is based on Eskom’s abuse of its dominant position in the electricity market and its exclusionary acts. It requests the Competition Commission to investigate the possibility of breaking Eskom into two distinct corporations that separately control electricity generation and transmission, both owned by the State.

This comes after Eskom was deeply implicated in the Public Protector’s “State of Capture Report” as well as the “Dentons Report” and after months during which Eskom has steadfastly refused to follow Ministerial Determinations on the procurement of Independent Power, where Eskom’s management has unlawfully refused to sign Power Purchase Agreements duly procured from the private sector by the Department of Energy. This conduct is presently preventing the investment of ZAR 58 billion into energy generation projects to proceed and as a consequence, the curbing of more than 13,000 construction jobs from commencing.

Eskom is also openly agitating for the building of a large nuclear fleet at an exorbitant cost that will ensure its monopoly into the 22nd century, which is a serious concern for civil society as Eskom’s poor leadership controls and conduct has been the subject of ongoing debate. The numerous calls for a cleanup and no political meddling within Eskom have now been justified following the revelations within the recent Dentons and Public Prosecutor’s reports.

Additionally, the State Owned Entity has repeatedly been accused of a lack of transparency and an inability to curb rampant maladministration and corruption, which has meant the consumer has been lumbered with increased costs of electricity to cover the expensive and excessive outcomes of Eskom’s questionable conduct.

The Organisation Undoing Tax Abuse (OUTA) believes that a separation of control over the arms of electricity generation and transmission will break Eskom’s stranglehold over the grid, thereby ensuring that open competition for energy generation at the lowest cost of production will reach the consumer, assuming political meddling is minimized which in itself may be a separate challenge.

OUTA’s complaint and recommendations to the Competition Commission includes the following:

• Eskom and its managers should be fined and held accountable for their abusive dominance;

• Eskom should be unbundled into distinct transmission and generation companies because:

                 - An independent grid operator will decide what power South Africa requires, at what prices and in what amounts;

                 - Price increases will be contained as proper competition is introduced;

                 - Blackouts due to poor management or corruption within the SOE will be avoided;

                 - Corruption within Eskom will no longer be passed onto the electricity consumer;

                 - Municipalities will be at liberty to buy directly from Independent Power Producers or to construct their own electricity generation plants;

                 - All competitive power generation options will be allowed onto the grid;

                 - Maintenance and expansion of the grid will be rationalized and driven by economic reasons;

                 - Greater flexibility should arise for consumers to enter agreements with municipalities;

                 - It will enable municipalities to purchase excess electricity from household solar energy when available;

                 - South Africa will move further away from the situation where an Eskom insolvency or technical failure will pull down the entire grid.

                 - The ISMO legislation, which gives effect to OUTA’s request, was drafted in 2004 and subsequently passed by Parliament. Hence OUTA’S suggested request can be                     implemented once the President signs it into law.

A full copy of OUTA’s submission to the Competition Commission is found here.