Sep 05, 2012
Eskom asked to integrate additional new-build options into tariff submissionBack
Africa|CoAL|Energy Intensive User Group|Eskom|Nuclear|Projects|Renewable Energy|Renewable-Energy|Africa|Kusile Power Station|Energy|Nuclear|State-owned Electricity Utility|Dipuo Peters|Eskom|Power|Sanyo R227 Portable Audio Device|South Africa
© Reuse this
The initial deadline for submission to the National Energy Regulator of South Africa (Nersa) had been set for August 31 and CFO Paul O'Flaherty said on Wednesday that Eskom had been more than ready to submit its third multiyear price determination period (MYPD3) documentation, which ran to around 3 000 pages, by that date.
He stressed, too, that Eskom’s “compliant” and “competent” application had been widely canvassed with government and civil society stakeholders.
Nevertheless, O’Flaherty refused to be drawn on the quantum, or the phasing, of the increases being sought, saying only that the application that was meant to have been submitted on Friday had included “double digit” increases over the period.
The utility currently estimated cost-reflective tariffs to be 90c/kWh (real), against prevailing tariffs of around 60c/kWh and the application had been guided by the principle of transitioning towards cost-reflectivity over a five-year horizon, from April 1, 2013 to March 31, 2018. Such a transition was necessary to provide assurance to Eskom bondholders and to the credit ratings agencies that the utility had the standalone capacity to repay the R227-billion of borrowings it was raising to pay for its R323-billion build programme.
It had been reported separately that Eskom would be seeking yearly increases of between 14.6% and 19% over the period, which was likely to meet resistance from stakeholders. The Energy Intensive User Group had already indicated that prices were rising “too fast and too high” for companies to remain globally competitive.
Should the clarifications being sought from government be forthcoming by the end of the week, O’Flaherty said Eskom should be able to redraft its submission by the end of September or early October.
But Nersa, whose consultation timeframes were being curtailed by the delay, had the authority to set a new deadline. At this stage, there was broad-based agreement that the March 15, 2013, deadline for approval by Parliament should not be shifted.
Government was concerned that the MYPD3 application had not catered for likely costs associated with any new Eskom projects beyond the Kusile power station, and had also limited the renewable energy horizon to those associated with the current process to procure 3 725 MW.
O’Flaherty said multiple scenarios had been considered, but Eskom felt it could only submit on the basis of approved projects, or for projects supported by a determination by the Energy Minister Dipuo Peters.
The application had also been informed by an assumption that energy demand would not grow by more than 1.9% a year, which was far below initial estimates of demand expanding by over 3% a year.
In other words, the application was not aligned to the Integrated Resource Plan (IRP2010), which implied additional new build costs that could arise during the MYPD3 period.
In fact, Peters indicated recently that she was poised to make determinations that would to transform the Renewable Energy Independent Power Producer Programme into a rolling procurement process in line with the IRP2010. She was also considering new determinations for the procurement of conventional capacity from independent power producers.
However, O’Flaherty said that, in the absence of these determinations or any “direction” on possible future build options, Eskom had had to make a call on what should be included in the application. Eskom also did not agree with the IRP2010’s demand growth assumptions, which had been a major feature in guiding the application.
“[For instance], it is already to late to expect a nuclear programme in 2023 – it’s too late. It’s also too late to expect that there is going to be 500 MW of new coal in 2014, as the IRP2010 indicates, because there have been no decisions.”
Besides the transition to cost reflectivity, O’Flaherty also confirmed that the MYPD3 had been premised on single-digit increases in primary energy costs and the institution of a mandatory energy conservation scheme.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Infrastructure News
Updated 7 hours ago The retail price of 95-grade petrol in South Africa will drop by 45 cents or 3.3 percent a liter from next Wednesday, while wholesale diesel will decrease by 4.9 percent, the government said on Friday. Petrol will cost 13.16 rand ($1.20) a liter while the wholesale...
Updated 7 hours ago Special purpose vehicle GreenCape will, by the end of 2014, make an application to the Department of Trade and Industry (DTI), the Western Cape provincial government and the City of Cape Town to declare Atlantis, on the Western seaboard, a special economic zone...
Updated 7 hours ago The German government has committed a further R70-million towards the second phase of the Non-Motorised Transport (NMT) programme. The NMT programme forms part of the Department of Environmental Affairs’ 2010 FIFA World Cup National Greening Legacy Programme.
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
In the next 20 years, it was expected that, in Africa, more people would live in cities and towns than in rural areas, United Nations Habitat executive director Dr Aisa Kirabo Kacyira said at the Human Settlements Indaba that took place earlier this month in...
Tough-talking Human Settlements Minister Lindiwe Sisulu has committed government to building 1.5-million low-cost houses over the next five years, telling the Human Settlements Indaba in Johannesburg on Wednesday that the State would achieve this target through the...
Over the past 20 years there has been persistent concern about deindustrialisation in South Africa, as well as the fact that locally produced manufactured products have been increasingly displaced by imports.
Financial agreement for Ghanian independent power producer (IPP) Cenpower Generation Company’s $900-million, 350 MW combined-cycle gas-turbine power plant was finalised earlier this month, paving the way for the project’s construction to begin before 2015 in Tema,...
The revenue implications for South Africa of ‘base erosion and profit shifting’ by corporate taxpayers are firmly in the crosshairs of the Davis Tax Committee (DTC) and Judge Dennis Davis hinted last week that recommendations were being considered to “detect and...