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May 15, 2008

Eskom seeks regulator approval to double DSM budget

© Reuse this Capacity constrained power utility Eskom has asked the National Energy Regulator of South Africa (Nersa) to more-than-double the amount of money it can claim back from government for its demand-side management (DSM) programme for this financial year to R2,5-billion, an official said this week.

This came after harsh criticism from a top industry official that project approval delays were rendering the DSM programme "dysfunctional".

Eskom DSM GM Andrew Etzinger conceded that the firm was taking financial strain, but, in fact, planned on expanding its DSM programme.

"According to the regulator, we have a budget of R400-million, which we have extended internally to R1,2-billion for our current financial year," he said in an interview.

"We would want to extend that from about R1,2-billion to about R2,5-billion, so there's a substantial increase that we've asked for, which is part of our price increase application to the regulator."

Etzinger said that the reason that Eskom had suspended the signing on of new DSM projects earlier this year was because it had already allocated the full R1,2-billion.

This stood in contrast to what another DSM manager, Monkwe Mpye, told Engineering News Online on May 5.

He said that new DSM projects had been put on ice because of "cash-flow issues" stemming from soaring coal and diesel prices.

"It's certainly not the case that we have diverted costs from our DSM programme to buy coal," Etzinger asserted. "If anything, we have overextended ourselves on the DSM programme, which poses a risk if we don't get permission from the regulator to recover these costs - it will come off Eskom's bottom line."

"We're out on a limb because of our DSM acceleration," he added.

But South African Association of Energy Service Companies (Escos) president Ken Gram believed Eskom's current DSM programme "is the single biggest hindrances to saving energy in this country".

He said in a telephone interview that getting DSM projects approved through Eskom's system took up to two years.

He specifically mentioned an Esco that had finally reached agreements on three or four DSM projects this year, only to be told by Eskom that it would not sign on any new projects until June.


Gram said that the World Bank had recommended to Eskom that it change its approach to DSM to making a "standard offer".

He explained that this would greatly simplify processes, as the utility would then pay customers a set amount for each MW that they removed from the grid.

Etzinger said that this was what Eskom had applied to Nersa for.

He stated that the current environment was vastly different to what it was about five years ago, when the utility adopted its DSM policies.

"At the time, our priority was on load shifting and not energy efficiency, those have changed dramatically," Etzinger said. "We need 3 000 MW of DSM to be implemented immediately."

Secondly, he believed that Eskom's focus must shift to energy efficiency, rather than shifting power use from peak usage times.

"Both in terms of how projects are evaluated, the extent to which they are funded and are prioritised between energy efficiency and load management - all of that needs to change," Etzinger noted.

"We need to vastly accelerate the evaluation and approval stage for projects brought to us, and this is where the standard offer comes into its own."

He said that Eskom now wanted to get prior approval for standard types of projects.

"Where we can achieve economies of scale, we really must," stated Etzinger.

He said that the power parastatal hoped to hear from the regulator "shortly" on what the new DSM policy looked like.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
© Reuse this Comment Guidelines (150 word limit)
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