http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.68Change: -0.03
R/$ = 12.37Change: -0.06
Au 1167.56 $/ozChange: -1.24
Pt 1069.00 $/ozChange: -13.00
 
 
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
Creamer Media Deputy Editor Online
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Electricity News
Nigeria's Transcorp plans to spend $1.575-billion from 2016 to 2018 to raise its power generation capacity to 2 500 megawatts (MW) from 610 MW now, the company said on Thursday. Transcorp, which also has interest in hotels, oil and gas, said it expected the...
DEPENDABLE SUPPLIER Tswelopele Engineering has established itself as a supplier of voltage regulators, surge arresters and auto-reclosers
Black-owned engineering specialist Tswelopele Engineering is taking part in Power-Gen Africa (PGA) “to enter new markets and to reach potential solution seekers in all of Africa,” says company CEO Bongane Madondo. PGA, which Madondo describes as a product-awareness...
SUPPLY SUCCESS Cable Croc successfully supplied 1 520 units of its patented Cable Croc anchoring system to the uMhlathuze municipality, in KwaZulu-Natal
Cable theft prevention systems developer Cable Croc is aiming to improve its Level 4 black economic empowerment (BEE) rating to increase the company’s accessibility to markets that require higher BEE ratings, such as municipalities, as well as the mining and rail...
More
 
 
Latest News
Updated 15 minutes ago This six-page brief is a synopsis of key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, revisions and expansion to sector support, competitiveness, and prospects for the sector.
Updated 34 minutes ago The DA and the EFF had caustic reactions to reports that the Passenger Rail Agency of South Africa (PRASA) imported brand new locomotives worth R600-million despite explicit warnings that the trains are not suited for local rail lines. Senior railways engineers and...
Former Cosatu general secretary Zwelinzima Vavi
Updated 39 minutes ago The statement issued by the ANC and its alliance partners after a summit last week is silent on several key issues, including the crises in state-owned enterprises, and is in conflict with views Cosatu is supposed to have, former Cosatu general secretary Zwelinzima...
More
 
 
Recent Research Reports
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Construction 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Electricity 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Road and Rail 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
 
 
 
 
 
This Week's Magazine
NHLANHLA NENE The main constraints to economic growth are domestic
Finance Minister Nhlanhla Nene earlier this month stated that, while South Africa’s 2015 economic growth target of 2% was achievable, it was not enough to deliver the tax revenue needed to combat the country’s challenges.
The World Steel Association has published the 2015 edition of the World Steel in Figures report, which shows an increase in steel production as well as provides an overview of steel industry activities from crude steel production to apparent steel use.
The 25-year master plan for Gauteng’s Aerotropolis project will go through a process of approval and adoption during June and July, says Aerotroplis project manager Jack van der Merwe. “We are also in the process of putting together a special purpose vehicle (SPV) to...
SOLAR PANELS The existing buildings in the Coega Industrial Development Zone lent themselves well to rooftop solar panel installations
The Coega Development Corporation (CDC) plans to fit 15 of its buildings, totalling 127 000 m2 of roof space, in the Coega Industrial Development Zone (IDZ), in the Eastern Cape, with solar panels.
The Supreme Court of Appeal’s (SCA’s) November 2014 judgment, ordering steel producer ArcelorMittal South Africa (AMSA) to hand over the 2003 Environmental Master Plan for its Vanderbijlpark steel plant to environmental pressure groups, confirmed the right of civil...
 
 
 
 
 
 
 
 
 
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