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S.Africa's Eskom may resort to blackouts this winter

Source: Reuters - Mon, 22 Apr 2013 10:39 GMT
Author: Reuters
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* Eskom working to avoid grid collapse "at all costs"

* Scheduled power outages may be necessary this winter

* New power station due to fire up end of 2013 (Adds background, government and CEO quotes)

By Sherilee Lakmidas

JOHANNESBURG, April 22 (Reuters) - South African power utility Eskom said it was prepared to introduce rolling blackouts this winter in some parts of the grid to prevent a complete system collapse, which would inflict far greater damage on the economy.

Chief Executive Brian Dames said Eskom could not rule out 'load shedding', as scheduled power outages are known in South Africa, as the utility wrestles with soaring demand in the southern hemisphere winter against limited supply.

"We will take whatever measures we need. It means if we get close, we will drop the load. We will drop the customers and protect the country," Dames told a news conference on Monday, adding he would work to avoid system-wide problems "at all costs".

Eskom, which provides 95 percent of the power to Africa's biggest economy, has been walking a tightrope for five years as it tries to bring long overdue new power plants online after the system was brought close to collapse in 2008.

The power crisis forced factories, mines and smelters to shut down for days, costing the economy billions of dollars in lost output.

Already this year, the grid has sometimes operated with a buffer of only 1 percent of its capacity.

The system will be under greater strain in the 2013 winter a year ago, because a massive maintenance backlog on Eskom's ageing power stations has forced the utility to continue repair work beyond the summer.

"We have reached a point where we cannot defer planned maintenance on the fleet," Dames said.

Eskom's hopes rest on the completion of the massive Medupi power plant by the end of this year, but construction of the coal-fired power station - the first to be built in more than 20 years - has been beset by delays.

The plant, 275 kms (160 miles) north of Johannesburg, is already running at least a year behind schedule, and building work has been plagued by strikes.

Construction of a second coal-fired power station, Kusile, was also disrupted by an illegal strike this month. Kusile is due to come on line next year, and the government has made clear it will tolerate no more disruptions.

"We are tolerating no delays and penalising failure," Public Enterprises Minister Malusi Gigaba said in the same news conference.

When both plants are fully built, Medupi and Kusile will add 9,600 megawatts to the grid's current 43,000 MW capacity.

The construction programme is part of a 350 billion rand ($38 billion) plan to ensure South Africa has enough power to underpin an economy growing at 3 percent a year - a rate the government wants to see rise to 5 percent or more.

To raise funds for the programme, Eskom has had to increase tariffs way in excess of inflation over the last three years. This year, however, the energy regulator granted Eskom a raise of only 8 percent - half what it wanted - casting a shadow over its long-term funding plans.

"The implications of the lower tariffs and revenue approved on Eskom's operations and overall business sustainability are currently being investigated," Gigaba said. ($1 = 9.2195 South African rand) (Reporting by Sherilee Lakmidas; Editing by Ed Cropley and Jane Baird)

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