http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 12.92Change: 0.11
R/$ = 12.00Change: 0.14
Au 1203.29 $/ozChange: -3.61
Pt 1161.50 $/ozChange: -5.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
May 17, 2013

Monopoly on power must end

Back
Africa|CoAL|Cogeneration|Consulting|Eskom|Frost|PROJECT|Projects|Resources|System|Water|Africa|South Africa|Ancillary Services|Cogeneration|Energy|Energy Charge|Energy Mix|Energy Production|Energy-charge Component|Maintenance|Power Generation|Power Producers|Power-generation|Service|Services|Environmental|Cogeneration|Cornelis Van Der Waal|Eskom|Power|Water|South Africa
Africa|CoAL|Cogeneration|Consulting|Eskom|PROJECT|Projects|Resources|System|Water|Africa||Cogeneration|Energy|Maintenance|Power Generation|Power-generation|Service|Services|Environmental|Cogeneration|Power|Water|
africa-company|coal|cogeneration|consulting-company|eskom|frost-company|project|projects|resources|system|water-company|africa|south-africa|ancillary-services|cogeneration-industry-term|energy|energy-charge|energy-mix|energy-production|energy-charge-component|maintenance|power-generation|power-producers|power-generation-industry-term|service|services|environmental|cogeneration-person|cornelis-van-der-waal|eskom-person|power|water|south-africa-region
© Reuse this



For economic activity to be supported, more power generation in South Africa is needed; hence, we need more clarity from the Department of Energy on the role of independent power producers (IPPs) in power generation, given the constrained power system operated by State-owned power utility Eskom, says research and consulting firm Frost & Sullivan energy and power leader Cornelis van der Waal.

Since the National Energy Regulator of South Africa (Nersa) decided to grant Eskom an 8% increase, instead of the requested 16% average increase a year over five years, new project development will prove to be one of the biggest challenges in Eskom’s long-term planning, he says.

Eskom admits on its website that the introduction of private-sector generation has multiple benefits. “It will contribute greatly to the diversification of the supply and nature of energy production, assist in introducing new skills and capital to the industry and enable the benchmarking of performance and pricing,” states the utility.

Eskom further states on its website that its application for revenue over five years translated into an average price increase of 13% for its needs and 3% to support the introduction of IPPs into the country’s energy mix, amounting to 16%. “This is a nominal price increase of 67c/kWh from the current average of 61c/kWh in 2012/13, to an average price level of 128c/kWh in 2017/18,” says Eskom.

The approved 8% tariff increase, which was implemented by the utility on April 1, implies that there will be an increase on the homelight 20A customers consuming up to 350 kWh/m, which will be equivalent to an inflation of 5.6%.

The average price increase for all other residential customers with homelight 60A and homepower will be 8%. Nersa points out in a report, released on February 28, that this will be in line with the third multiyear price determination (MYPD3) Eskom control period, which runs from 2013-2017.

All tariff cross-subsidies, both received and paid, must be shown transparently. These subsidies pertain to affordability subsidies, low-voltage subsidies and historic electrification and network subsidies in large power customer urban tariffs.

Nersa also notes in the report that the use-of-system charges must be based on the cost-per-voltage level for all large power customers. Where there are low-voltage subsidies, these must be transparently shown as a low-voltage subsidy charge.

The report explains that the reliability and service charge covering the cost of providing ancillary services, embedded in the energy charge, must be unbundled for large power tariffs. “The environmental levy charge must be included in the energy-charge component of the tariff and not shown separately. Eskom must ensure that alternative tariff options, other than time-of-use tariffs, are available to municipalities that have a predominantly residential load mix,” the report further states.

The overall costs have increased by 178.60% from the last year of the MYPD2 (2012/13) to the first year of the MYPD3 (2013/14). Some of the reasons provided for the tariff hike are the funding of electrification, new connections and an increase in customer-service costs to improve revenue collection in Soweto.

In the absence of proper justification for the increases and project list, Nersa said it limited the increases to inflation-related increases and expected capacity expansion for the MYPD3 control period, resulting in an adjustment of more than R47-billion.

MYPD3 Control Period
“In keeping with the Electricity Regulation Act of 2006, the revenue being requested in this application will cover R1-trillion over five years, of which two-thirds come from primary energy and operating costs, while the remaining one-third is related to assets, namely depreciation and return on assets,” states Eskom.

The cost of basic natural resources used to produce electricity, including coal, water, biomass and sorbent, which excludes the IPPs, will increase at an average of 8.6% a year for Eskom requirements and by 10% a year once IPPs are incorporated, highlights Nersa.

“Eskom’s operating costs increase by an average of just more than 8% a year. These costs include the maintenance of existing plant and employee costs. Eskom currently has more than 44 000 people on its payroll and this will increase to 45 500 over the MYPD3 period. Most of Eskom’s power stations are in their midlife and require substantial spending on mainte- nance and refurbishment if their performance is to be sustained and improved,” outlines Nersa.

“This means that maintenance costs will continue to increase at a higher rate than that of inflation. Depreciation is set to rise at a yearly average of 10% over the MYPD3 period as we phase in the depreciated replacement valuation method as per government’s Electricity Pricing Policy,” Nersa explains.

Eskom points out that it is crucial that the private sector plays a role in dealing with the future electricity needs of the country. This will reduce the funding burden on government; relieve the borrowing requirements of Eskom; and introduce generation technologies that Eskom may not consider as part of its core function, which may play an important role in the future electricity supply options, particularly off-grid, dis- tributed generation, cogeneration and small-scale renewable projects.

“Given Nersa’s decision, Eskom would still like to remain the baseload supplier in the country. Therefore, it is important for Eskom to maintain its plans for projects such as those for capacity expansions. However, Eskom must find and secure ways to fund these projects, as a lack of funding is limiting its progress,” Van der Waal concludes.

Edited by: Tracy Hancock
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Electricity News
State-owned power utility Eskom and Public Enterprises Minister Lynne Brown confirmed on Wednesday that contracts under the so-called short-term power purchase programme (STPPP) had been renewed ahead of the March 31, 2015, expiry date. Eskom told Engineering News...
State-owned power utility Eskom said on Wednesday that full power from Medupi Unit 6 should be reached by the end of May and that it was working to ensure that the completion of the remaining five units was not undermined by further technical or labour problems. The...
A new handbook, titled Understanding Power Purchase Agreements, has been published under the aegis of President Barack Obama’s Power Africa initiative, which was launched in June 2013 with the aim of facilitating the addition of 30 000 MW of new electricity...
More
 
 
Latest News
State-owned power utility Eskom and Public Enterprises Minister Lynne Brown confirmed on Wednesday that contracts under the so-called short-term power purchase programme (STPPP) had been renewed ahead of the March 31, 2015, expiry date. Eskom told Engineering News...
The value of copper stolen in February decreased to R12.7-million, from R12.9-million in January, but was 18.1% higher than the value of copper stolen in February 2014, the South African Chamber of Commerce and Industry (Sacci) revealed on Wednesday. In its latest...
Paper and packaging group Mpact has concluded a broad-based black-economic empowerment (BBBEE) deal that will see a purpose-formed trust subscribing for 10% of the ordinary issued shares in group subsidiary Mpact Operations, which holds its South African businesses....
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
 
 
 
 
 
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
RESOURCEFUL The raw material for the pilot plant would be supplied from the dissolving wood pulp plants at Sappi’s Saiccor and Ngodwana mills, in South Africa, and the Cloquet mill, in the US
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96