A Little Night Music is a musical based on a 1955 Ingmar Bergman film, Smiles of a Summer Night. One of the songs from the musical is Send in the Clowns and its first few lines are: “Isn’t it rich, aren’t we a pair; Me here at last on the ground – and you in mid-air?”
This song reminds me of nothing so much as members of the National Energy Regulator of South Africa (Nersa). If you think I am calling Nersa members clowns, you would be quite correct. If you think I am doing so without necessary cause . . . read on.
Nersa is a government body that is supposed to regulate the electricity, piped-gas and petroleum pipeline industries in terms of the applicable national regulations. By ‘regulate’, the idea is that tariffs have to be approved by Nersa. National electricity utility Eskom is, in general, allowed to charge an amount that recovers its fuel and operating costs and allows some mark-up. Fairly recently, Nersa erred badly by not allowing Eskom to include certain operating costs. The dispute refers back to 2018/19, when Eskom requested a 18.91% average price increase and was granted only 5.23%. Judge Jody Kollapen, of the Pretoria division of the High Court, berated Nersa for “unfairly, irrationally and unreasonably” departing from the methodology by which the tariff was determined. Kollapen said Nersa had deviated from the methodology in an important respect, without informing Eskom and allowing it an opportunity to be heard.
And now Nersa wants to change the way in which Eskom determines price increases and (sounds of a drum roll) Nersa has approved the application by Turkey’s Karpowership to moor three ships off South Africa’s coast and generate electricity for you and me. They will use internal combustion engines driven by liquefied natural gas (LNG). Well, apart from the massive environmental impact of this, so what? Nersa says the ships will generate power at between R1.30/kWh and R1.48/kWh. Sounds great, huh? Only it’s totally wrong. Based on the current price of LNG, the price would be more likely R5/kWh. But (as they say) wait, there’s more. What about this news item: “November contracts at the Dutch TTF hub – a European benchmark for natural gas – were trading at about €118/MWh just after midday in London. “The front-month contract was up almost 19% on the day, setting a new record high, and has risen almost 400% since the start of the year” – according to an October 7 report by CNBC. And 17 British gas/energy suppliers have gone out of business, owing to high gas prices. This means that to source energy from a supplier who is using LNG is to commit a very stupid act, since the prices will be through the roof. Now, can the people at Nersa not grasp this? As I said, with the current price of LNG, the price would be R5/kWh. It’s not hard to work this out. It’s a very simple calculation. But, seemingly, this is beyond the people at Nersa. What you could do, naturally, is to ask Nersa how they get to lower figures for energy of R1.30/kWh and R1.48/kWh. Well, ask away.
Nersa has provided some tables. One table is importantly titled ‘Table 9: Karpowership Richards Bay (RF) (Pty) Ltd’s calculated tariff”. But all the values in the tables have been blacked out, like censorship in the good old days. Nersa has justified blacking out the figures on the basis that “financial information is confidential”. Good grief, go hang my cat! This is right out of South African Nationalist Party 1978, when the then Prime Minister, BJ Vorster, resigned because it was discovered he knew about corrupt practices in government (yes, things were different then). At the time, government expenditure was also concealed with convenient black ink. So, either the Nersa members are corrupt or are simply empty headed, like clowns. I know what I think. At least it’s good for a laugh.