Jan 23, 2012
Nersa postpones power price hearings as it receives notice of policy reviewBack
Engineering|Africa|Eskom|Africa|South Africa|Electricity|Electricity Pricing Policy|Energy|Dipuo Peters|Nelisiwe Magubane|Power|Thembani Bukula
© Reuse this
Full-time regulatory member for electricity Thembani Bukula told Engineering News Online on Monday that notice of the postponement would be communicated soon.
The decision had been made owing to the fact that Nersa had received a letter from Energy Minister Dipuo Peters “last week” stating that government intended revising the electricity pricing policy (EPP).
“Our public hearings would have been based on the old pricing policy. But we have now received a letter – in fact we received it last week – from the Minister that indicates, formally, that there is a relook at the pricing policy and that she wants our input. Therefore, we will not proceed with those hearings,” Bukula explains.
He said that the letter had not elaborated on the nature of the possible changes being considered, but that further information was likely to be made available in the not too distant future.
In October, the regulator published a consultation paper on the MYPD methodology and called for public comments by November 14.
However, during that period Peters, as well as Department of Energy director-general Nelisiwe Magubane, made several references to the fact that government intended reviewing the EPP in a bid to moderate the rate at which South Africa’s power prices were set to rise.
In December, Peters indicated that the changes could affect the methodology used by the regulator to determine power utility Eskom’s tariffs.
The current method used by the National Energy Regulator of South Africa (Nersa) is premised on a rate-of-return methodology and based on the replacement cost of the assets. Nersa has adopted the depreciated replacement cost method for asset valuation, which was itself based on an “objective” calculation of the modern equivalent asset value.
Under the prevailing EPP, the tariff is also required to move towards the long-run marginal cost (LRMC) within five years of its adoption.
But Peters said government was considering an approach that delayed the tariff increases, which might be achieved by lowering the return to the utility, which would result in Eskom moving towards the LRMC position in a period longer than five years.
But she also indicated that such a change would only be considered during the next tariff determination, for the period starting in 2013. In other words, it was unlikely to affect increases that had already been approved by Nersa under the second multiyear price determination period, or MYPD2. During that period three increases of around 25% a year had been approved for 2010/11, 2011/12 and 2012/13.
However, business would like the intervention to take place before 2013, with several sectors warning that the power price increases were undermining growth, employment and competitiveness.
Many have also pointed to the strong improvement in Eskom’s financial position as evidence that the price increases could not be justified. The State-owned utility reported a profit of R12.8-billion in the six months to the end of September, up from R9.5-billion in the comparable period a year earlier.
But Eskom, which told Engineering News Online that it had no knowledge of Peters’ letter to Nersa, had repeatedly stressed that its return on assets remained modest at 3.7%. It also warned that its debt would rise to over R300-billion over the coming five years.
Eskom had repeatedly called for regulatory stability in light of its reliance on debt to fund its capital programmes and had cautioned against changes that could negatively affect its credit rating.
The utility also indicated on Monday that it was still preparing its next tariff application on the basis of the current MYPD methodology.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Economy News
Recent Research Reports
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.
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.
This Week's Magazine
South Africa remains an important manufacturing and export platform for Ford Motor Company, says executive chairperson Bill Ford. However, he adds that other countries on the continent are “becoming interesting”, and that the US carmaker is casting its net wider for...
Germany’s Max-Planck-Society (MPG) and the Max-Planck-Institute for Radio Astronomy (MPlfR) are investing €11-million (about R150-million) into South Africa’s MeerKAT radio telescope array programme. The money will be used to design, build and install S-band radio...
Infrastructure spend in sub-Saharan Africa will grow from $70-billion in 2013 to $180-billion by 2025, says PwC capital projects and infrastructure Africa leader Jonathan Cawood. This is one of the findings of PwC’s Capital Projects & Infrastructure report on East...
Private-owned defence and aerospace manufacturer Paramount Group and the Ichikowitz Family Foundation unveiled its Anti-Poaching Skills and K9 Training Academy in Magaliesburg last month.
The inclusion of Bluetooth to provide sub-three meter accuracy and heightened functionality for users is one of the ways to change existing wireless networks into engagement networks. An engagement network differs from common wireless networks in that it enables the...