MINISTER KGOSIENTSHO RAMOKGOPA PROVIDES AN UPDATE ON THE FINALISATION OF THE INTEGRATED RESOURCE PLAN 2023 AND ESKOM’S KEY REVISION NUMBER PROGRAMME
20 November 2024

Good morning, ladies and gentlemen,
I’d like to thank the members of the media once more for taking time to be with us this morning so that we can inform the rest of the country about the developments in the energy and electricity space.

Update on South Africa's Integrated Resource Plan and Public Participation in Energy Tariff Determination
Today’s focus will be an update of the Integrated Resource Plan (IRP), which is a comprehensive articulation of the fuel sources that will be powering the South African economy going into the future. We will therefore share where we are in relation to the finalization of that very publicly intense process. But before that, I’d first like to encourage South Africans to participate in the National Energy Regulator of South Africa (NERSA) process of tariff determination.

As we know, Eskom has made an application to NERSA. The expectation is that the application is now subjected to an intense public participation, public scrutiny in line with the transparency in the determination of the tariff. That exercise is executed by NERSA, which is our energy regulator. Everyone that has a view, is aggrieved, has proposals, gets to subject himself or herself to that process and make those submissions. These are in-person submissions. I'm sure written submissions can also be made. This is to ensure the process is democratic, robust and we're able to take the multiplicity of views from industry players, households and all interested parties.

We have to subject ourselves to that process. People are able to articulate their views in their own language so that we get to hear the cries of our people and the proposals to the extent that people have good ideas on how best to address the issues of runaway price increases of electricity. As government we will be fashioning interventions to ensure that we provide relief. It's still a process that is underway inside government. Before NERSA makes a determination, as government we would have made our submissions. I can confidently say we will get to a situation where we don't realize a 36% - 40% tariff increase.

It should be something significantly lower than that, considering the need for industry to be competitive, the pressures that the households are experiencing. We have committed ourselves as the 7th administration that one of our 3 priority areas of this administration is to ensure that we fight poverty and reduce the cost of living. We know that the cost of utilities - water and electricity - is a big component of the spending of households and more disproportionate in low-income households.

There is a whole set of measures and at the right time I'll make an announcement. It's an engagement that is currently happening internally. I'm leading it, the president has
directed it must happen. I want to say to the rest of the country that rest assured we will be making interventions that will provide significant amount of relief. NERSA will determine the percentage and we will subject to that process.

Simultaneously, we'll not undermine the ability of Eskom to continue to operate. As a going concern, some of the assumptions and the basis of the application of Eskom are justified. It’s possible to do both, Eskom can continue as a going concern, not undermine its ability to execute on its mandate, and on the other hand, the need for us to provide some degree of relief to households and industry. We will announce what those measures are. To the extent that they are of a policy nature, we'll make a firm articulation and then make that known to NERSA to accommodate that into their process.

At the right time, I'll make that announcement. Let's submit to this process so that we allow NERSA an opportunity to have the benefit of the multiplicity of views.

Assessing the Resilience of Power Supply: Progress and Future Outlook
An update in relation to the performance of the system, yesterday 19th November 2024 was a milestone that set a record in our response to the load shedding question. We recorded the longest stretch of uninterrupted power supply in 5 years. This presents two cases. Firstly, that load shedding is still an area that requires intervention. When the time is right, we will make the appropriate announcement. Currently, the system is performing exceptionally well, exceeding our own expectations.

It marks the longest period of uninterrupted power supply. The statement is carefully crafted, not to suggest that we can say in absolute terms that load shedding is over. Secondly, the interventions are now resilient, meaning even if there is a cluster of units failing, the system can carry itself without having to resort to load-shedding. Suffice to say we have built some degree of headspace to allow for incidents where clusters of units fail, the system can still carry itself without interrupting businesses and the experiences at the household level. This work has proven itself to be resilient. We want to sustain this momentum going into the future.

In terms of the unplanned capacity loss factors, we’ve been able to drastically reduce the amount of megawatts that are not available at any given time as a result of the units failing on their own, the unreliability of the units and also the inefficiencies. Compared to the same period last year, we were sitting at about 16 400 megawatts not available at any given time. Now we're averaging about 11 235 MW. This means there's a delta rate difference of 5 000 MW. There's an improvement of 5 000 MW in the same period last year. From an energy availability factor, this marks an improvement of 7.3%. Essentially, we spent R15 billion less than last year. That's significant going into the future.

These savings are going to be factored into the cost of electricity supply. In the future, we know for primary energy, we're able to reduce that cost by R15 billion. Going forward we'll get closer to achieving 70% Energy Availability Factor (EAF) marked for March 2025. We're on course to achieve that. This is done while maintaining the health of the system and not compromising on planned maintenance. For the summer outlook, we are consistent at 6 900 MW of planned maintenance. As planned maintenance increases during the summer period, demands decrease, and the improvement continues relentlessly. We want to congratulate the team at Eskom for the exceptional work that they are doing, ensuring that there's reliability of the system.

Ensuring Electricity Security and Economic Growth: The Integrated Resource Plan Update
Now on the more substantive update, the first one is on the IRP. The plan seeks to achieve 3 things. It must ensure that we achieve conditions of security for electricity supply. In the past few years, we experienced major challenges on the generation side, and we were able to sustain and keep the promise of the security of electricity supply. With the current improvements we have achieved conditions that guarantee security of electricity supply and allow the economic growth that is expected.

Some projections in the public domain from reputable institutions like the Bureau of Economic Research based in Stellenbosch suggests if we continue with the electricity and logistics improvements - which have been the structural constraint to the South African economy - and be aggressive on the execution of the operation Vul’indlela reforms, we can reach a GDP of about 3.5% in the next two years. To achieve that, we need security of supply and that's why it's important to build on that.

Secondly, we need to minimize the cost of electricity to the economy. It’s one thing to have electricity available and quite another for people to be able to afford it. That's why I'm encouraging South Africans to subject themselves to that public consultation process overseen by NERSA to make the necessary submission. When we reconfigure the aggregate mix of sources of energy, it is known that solar and wind provide the cheapest form of electricity.

In future we're expecting an exponential increase in their share in the aggregate mix. Base-load is important - coal, gas to power, nuclear and hydro - they are going to be significant components of that mix. This is not a binary conversation, it's not one over the other, but it's their share of the mix. The aggregate distribution of the mix must enable the realization of affordability electricity.

Lastly, the plan seeks to minimize the impact of electricity supply to the environment. Accepting the adverse impact to the environment, we accommodate interventions that are meant to minimize the adverse impact to the environment. It brings together and combines efforts to a common goal, that’s what the IRP seeks to do. This further enables us to project the demand going into the future with a number of assumptions in that demand. In some of the assumptions the underlying assumption is the rate of growth of the South African economy and interventions to support that growth.

Thereafter stock is taken of the available generation capacity. This raises the question whether this available capacity can meet that demand. In many instances, it might not be sufficient. This creates a need to generate options to find sources of new generation, anchored on a primary assumption, rate of growth, the levelized cost of energy from one source to the other. Based on the various assumptions they are combined into a mathematical model that churns out what the model should be, distribution or the allocation of the various sources of energy as part of that mix. We have undertaken that exercise and gone out to the public for comments.

The IRP was gazetted on 4th January 2024 and received 4 300 substantive comments from various parties across the length and breadth of the country. Of these 4 000 plus comments, 136 were substantive. This constitutes people who are challenging several aspects and making suggestions on how best to improve this model. That's why it's important that we're able to enter that stakeholder engagement. We had three rounds of these engagements, starting from 9 January and created multiple platforms of engagement to maximize the participation of people for those who couldn't get to these areas of engagement.

Participants comprised stakeholders, civil society business, academia, government institutions that made their own submissions in terms of how we should treat this IRP. A team led by the South African National Energy Development Institute (Sanedi) was constituted, which is a think tank repository of skills in the electricity and energy space. They've got an appreciation of the science that underpins this. We asked them to package them into various themes to be able to provide the necessary response or accommodate some of these submissions to the extent that we find them to be acceptable. From that merged 8 key themes.

The first one relates to issues around the process, reporting, and the implementation of the IRP. The second thematic area that came out of these 133 plus substantive submissions was the misalignment between policy goals and the IRP objectives or intervention or the aggregate of the mix. Another key issue is about the underlying assumption, the modeling, the methodology, and the kind of costs that are assumed in that IRP. In the IRP, we generated two horizons. The horizons up to 2030 were anchored on the fact that there was significant deficit in the generation of electricity relative to the demand, a situation of load shedding.

That assumption suggested a likelihood of ending load shedding by 2027 which requires extraordinary interventions that are not normal, above normal based resolving a crisis. The second horizon 2030 and beyond, until 2050. Horizon 1 is essentially eliminated because there are no load shedding conditions. All this will come out in the IRP. There are issues of energy technologies and talks about the balance between climate change commitments.
We have committed to the reduction of anything between 350 to 420 million tons of CO2 annually going into the future as part of our nationally determined contribution. The aggregate, the complexion of the IRP does not respond to that and presents a misalignment. It’s something that requires intervention. One thing that didn’t find expression in the version that had gone out is the cost and the impact of transmission and distribution in relation to the objective of the IRP. It's something that did not receive attention that we’ll look at as a focus.

What happens next is to deepen the revision conversation through the substantive submissions. We will have a fiscal engagement in Johannesburg sometime next week and then have the targeted engagement. It’s targeted because it’s not a new process, we are going back to the people who had made the initial submissions and consolidate those inputs that will form a report to be delivered at Cabinet and then we have our IRP and that is going to guide our way going to the future.

Eskom Key Revision Number Deadlines: Impending Meter Changes and Consumer Impact
The second substantive briefing is the work of Eskom regarding the Key Revision Number, the KRN. The key revision is the need to recode your meter. Eskom has done tremendously well; they have gone out into the public domain for the past 6 to 8 months where they have been intensifying that messaging to the communities in the past 3 months and there is a need to update this. There is a time stamp on this pre-paid meter re-coding which ends on 24 November 2024. The date cannot be extended due to technical issues. If consumers have not re-coded by 24th, they won’t be able to replenish electricity units on the obsolete system.

The bigger problem is that beyond the 24th the meter will have to be physically removed at a cost to the consumer whereas the current re-coding happens automatically upon purchasing electricity units. Ultimately, it's not a function of whether you have the money or the means, but simply that the meter will not be able to accept those tokens. The base date of 1993 is going to run out of range in 2024.

That's a technical specification, Eskom can't be blamed. The team has done an extensive amount of work and we're intensifying that. We thought we must lift it at this level so that there's appreciation. It is anticipated that by the 25 November 2024, there will be people lining up protesting, and expressing grievances. We are saying that there’s still four days to do this exercise. Eskom has overextended itself to accommodate households. We know where the concentration of the people who have not updated is geographically.

Resources will be allocated relative to the concentration of what is outstanding to address this. Eskom will stop dispensing the KRN1 electricity token, that means the meters will be inactive from that time. If a customer’s meter has not been re-coded to KRN2, which is a new generation now going into the future, tokens will not be accepted and purchased. Essentially presenting a situation where there is no access to electricity. Currently it's remote re-coding, once a consumer buys, it’s re-coded remotely by inserting the token.

I’m urging households and consumers to ensure that we do the same. We are extending ourselves over extended hours to address this situation. I want to make the point that Eskom successfully pre-coded about 6.9 million prepaid meters to ensure that customers can continue to buy. I'm making this point to dispel the myth that this program only starts now. It's something that has been happening over time.

The significant number of people who are outside this number are generally zero buyers. Zero buyers are people with a prepaid meter, consume electricity, but never bought the unit from Eskom. Or in the past six to eight months, the person has never bought. It means there are other means to replenish the meters.

Coincidentally, this helps with revenue protection. Revenue protection to Eskom, revenue protection to municipalities. I'm sure the municipalities are doing the same to eliminate the black-market arrangement. Generally, these people have not presented themselves. It's people who have not been paying, who are contributing to non-technical losses. It's people who are colloquially referred to as Izinyoka. These people are
undermining the financial sustainability of municipalities and Eskom. There are instances of perhaps failures, instances of capacity on Eskom’ side, of elderly people who don't have the necessary knowledge and technical know-how of how to do this.

That's the kind of support we've been providing and intend to escalate that support. But then there's that crowd that essentially is undermining the revenue base of Eskom and municipalities. And it is that crowd that is contributing to this tariff runaway. Consequently, to make up for its losses Eskom bills into tariff application benefits its bad debts, essentially money that can’t be collected. This burden is carried by everyone. We will use all types of media, social platforms, and media platforms to reach out.

I'm sure those that are supplied by municipalities will announce that program. For as long as it's on this first-generation version of meters, consumers will be subjected to that process. We call on everyone to ensure that they submit to that. So as part of this effort, we have already sent messages to about 4.9 million South African customers express our gratitude. There's 2.1 million people who have not yet migrated. These are 2.1 million people, as of yesterday, who stand the risk in the next five days, or at least from Monday, not having access to electricity. This is the 2.1 million consumers who are going to pay the cost of the replacement of that meter.

This is the 2.1 million people who must wait for the meter to be available, to be installed, before they get electricity. Eskom will ensure that we are ahead of the curve, because we know there plans to bypass this next generation of meters. As such, we should be ahead of those who want to undermine the ability of the state to execute and provide services by impeding and undermining our ability to execute. 2.1 million is a huge number and with the remaining four days, it means that on average, we should be collecting about 500 000 people a day.

That's a tall order, that's why it's important that we're able to maximize, because it could mean that if the 2.1 million people present, or half of them present themselves on the last day, we won’t have the capacity to re-code. 4.9 million consumers have already done it. Is this 2.1 million that is still outstanding. This is only Eskom customers and there's another set of customers that are sitting with municipalities. And I'm sure municipalities will be able to articulate on that.

Conclusion
On the IRP, we're at the end of finalizing the substantive comments next week. By the end of November, the IRP will be ready. It will be taken to Cabinet and then publicized. We're asking communities to please subject themselves to this exercise of re-coding so that we are not in the dark starting the 25th.

Thank you very much.