Why power costs so much

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Eskom decided this week not to release the controversial report drawn up by US law firm Dentons, despite having earlier invited the media to view it.

But some of the report’s findings were revealed yesterday by the Financial Mail.

The financial weekly said Dentons produced an explosive interim report in May 2015 to the board of the parastatal – implicating executives and top managers who allegedly diverted contracts for personal enrichment. They included coal and logistics deals.

In one case, R4.2-million worth of coal from a nearby mine ended up costing R13.4-million after additional costs were added, including R2.5-million to transport it and another R5-million as a “coal penalty adjustment”.

One version of the report – the result of a probe that was never finished – which named guilty parties, was recalled from all who saw it and then destroyed, the Financial Mail reported.

The report also raised questions about Eskom’s rationale for load-shedding – which plunged South Africa into a crisis.

The report raised questions about some of the arguments Eskom had forwarded to justify electricity tariff hikes which have increased four-fold since 2007.

Its authors pointed that, from 2007, coal prices fell on average by 50% a year yet Eskom’s coal bill had grown by 18% a year from 2006.

“If management’s energies are centred on leveraging Eskom’s considerable buying power for self-interest, rather than to drive efficiencies, the notion that the tariff is not cost-effective loses credibility,” the Financial Mail quoted the report saying.

The law firm said it had been stopped from continuing its investigations despite the board being aware it would take at least 12 months.

Eskom had also ensured that versions of the report progressively sanitised the allegations against specific individuals as well as details about dealings with Hitachi which was controversially awarded a contract at a time that Chancellor House, an ANC company, was a significant shareholder.

The details of the suppressed report emerge in the wake of the departure of Eskom CEO Brian Molefe, who was implicated in former Public Protector Thuli Madonsela’s State of Capture report in apparently irregular dealings with a Gupta family-linked mining company during his tenure.

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