The Organisation Undoing Tax Abuse (Outa) has requested the National Energy Regulator of South Africa (Nersa) to reject State-owned power utility Eskom’s application for permission to omit critical statistics in its upcoming Multi-Year Price Determination (MYPD) electricity price application.
The MYPD, which was amended by Nersa last year, will set electricity prices for 2018.
Eskom has requested a “blanket condonation” from Nersa to deviate from the MYPD methodology.
The amended Nersa rules require greater operational transparency from Eskom, including transparency with regard to its coal-burning operations.
However, Eskom on Friday reiterated that it would be unable to meet certain requirements of the MYPD methodology, as well as certain minimum information requirements for tariff applications.
“Not only should the additional requirements as ordered by the MYPD be enforced, the entity should be put under ‘lock and key’ until the commission of enquiry publishes its finding to ameliorate growing damages and losses,” said Outa spokesperson Ted Blom at the Nersa public hearings on Friday.
He noted that Eskom previously blindsided the energy regulator by saying it was operating efficiently and that it warranted tariff increases.
Blom also highlighted allegations of corruption and irregular coal contracts, which would soon be probed by a Special Investigating Unit inquiry.
“It seems as if Eskom can’t and won’t comply. Today, we should be hearing a five-year MYPD application and Eskom says it can’t even comply with an application for one year.”
Blom added that the only outcome from a Nersa ruling should be a massive price reduction in electricity tariffs, “which [should] amount to at least a 50% reduction in tariffs”.
“Eskom’s arrogance and refusal should be noted as their application unequivocally states that, because they do not want to be subjected to greater scrutiny, they will continue to apply for exemption from the transparency requirements of the MYPD,” he said.
Also speaking at the hearing, Eskom financial planning and economic regulation GM Calib Cassim said that Eskom had provided detailed written responses during the public consultation process, providing reasons for the utility’s deviations from the MYPD methodology.
Regarding coal, which remains a contentious issue, Cassim said that it was impossible for Eskom to provide a breakdown of coal volumes burnt per station, per contact type and per supplier.
“Eskom’s request for condonation relating to primary energy will continue until the methodology is revised,” he said, further pointing out that Eskom was unable to identify which suppliers’ coal was substandard.
He explained that it was not possible to provide burn costs and volumes to contract types and suppliers, owing to practical difficulties.
“Coal purchases and coal burn are two different concepts. All details requested for coal purchases per source will be provided,” said Cassim.
He added that Eskom was unable to provide detailed coal-handling costs per power station per process because it was not practical.
“Coal-handling costs refer to costs associated with the movement of coal within the power station. It is mostly an integrated process for which cost cannot be identified or determined per distinct activity,” he said.
Also speaking at the hearing, Business Unity South Africa’s (Busa’s) Jane Molony highlighted the ever-increasing price of electricity above inflation as a matter of deep concern.
“The spiral of decreasing demand and increasing price is not sustainable and must be addressed.”
She added that the integrity of the MYPD process was essential to confidence in the regulator and required information transparency.
Molony further noted that the rule of law needed to be applied and that it was imperative for the regulator to ensure compliance with its own rules and regulations.
“Deviations from these rules should only be condoned under exceptional circumstances and conditions,” she said.
Molony noted that this was particularly important in terms of potential further downgrades and added that confidence in independent regulators was a key element for investor confidence.