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Nersa rejects Eskom’s application for price hike

The National Energy Regulator of South Africa (Nersa) has rejected Eskom’s application for an additional 10.1% hike in the electricity price, on top of an already-approved 12.6% increase.

The electricity supplier’s Acting CEO Brian Molefe last week told Nersa during its submissions hearing that Eskom needs the extra money in order to keep Open Cycle Gas Turbines (OCGT) running. Without it, Eskom claims that loadshedding will be even more prevalent than it is now.

Molefe said Eskom needs R11bn per year to power OCGTs, R5.8bn funding per year for short-term contracts with independent power producers (STPPP) and further funds for an increased environmental levy.

He also pointed out that Eskom had to borrow money to run the OCGTs in 2014 and 2015, and that the amount requested will include the recovery through the RCA process.

Nersa’s Chairperson Jacob Modise said during the announcement that “our mandate is to regulate three key industries, that includes electricity and gas. Our challenge remains the regulation of the energy that balances the need of consumers and producers. It is never an easy task.”

He detailed the number of comments and complaints it received during the public hearings, saying that more that 225 rewritten responses and 30 presentations were made during small users and intensive users alike. “At the public hearings, the key issues were high prices will result in job losses and capacity in the economy,” he said.

Modise said that some of the OCGT commission dates have lapsed, and that no new information has been been given by Eskom on new commissions.

“Based on available information and analysis performed, the Energy Regulator has decided not to approve Eskom’s application for the selective reopener of the MYPD3 application for OCGT and short term power purchase programs, and the impact of the environmental levy,” Modise said.

He said that Eskom should submit an application for the adjustment in the allowed revenue in accordance to the MYPD methodology.

“Alternatively, [Eskom can submit] a new application for the period 1 April 2016 to 31 March 2019 with indicative projections for the period 1 April 2019 to 31 March 2021. The Energy Regulator did not consider the proposed increase to the environmental levy as it was not gazetted, and Eskom withdrew the application during the public hearings.”

Other factors considered during the application were the following:

  • The MYPD methodology does not provide for the selective reopener, but allows for the regulatory clearing account to be used.
  • The Energy Regulator is enjoined in making a decision to be consistent with the Constitution of the Republic of South Africa and all applicable laws,
  • The application did not provide the mechanism on how the proposed increase, if granted, can be implemented in the current financial year in a manner that is consistent with requirements of the Municipal Finance Management Act,
  • Any additional price increases for the 2015/16 financial year can not be considered a Section 28.6 of the Municipal Finance Management Act. It states that tariffs can not be increased during a financial year.
  • The application does not align with the credible long-term planning and certainty that MYPD sets out to achieve. Indeed, it works against such.

On Thursday last week, the government announced that a R23 billion bailout package for the troubled energy supplier, which was proposed by finance minister Nhlanhla Nene in February, has been approved by Parliament.

[Image – CC by 2.0/zen Sutherland]

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