Photo by: Duane Daws
Embattled electricity producer Eskom has confirmed that it has initiated a “selective reopener” of the third multiyear price determination (MYPD 3) from the 2015/16 financial year onwards. The reopener would seek an upward adjustment in electricity tariffs to cover the costs of securing further short-term power purchases from cogenerators, as well as the increased use of the diesel-fuelled open cycle gas turbines.
The State-owned utility gave no indication in a statement as to the size or timing of the price increase being sought, but a 25% figure had been flagged in media reports.
The increases would be over-and-above the 12.69% increase from April 1, 2015, which itself had been adjusted upwards from the 8% previously sanctioned by the National Energy Regulator of South Africa (Nersa) for the 2015/16 financial year.
Eskom had initially sought yearly increases on 16% over the MYPD3 horizon, which covered a five-year period, from April 1, 2013, to March 31, 2018.
The utility confirmed that the April 1, 2015, price increase for direct customers and municipalities remained 12.69%, but that municipal increases would be 14.25% from July 1, 2015, owing to the lag between the Eskom increase and the start of the municipal financial years.
The new approach to Nersa was the direct result, Eskom indicated, of its weak financial position, which was a consequence of “historical non-cost reflective tariffs and the lag in recovery of eligible expenditure”.
Eskom’s balance sheet could no longer “pre-fund further costs that are necessitated by a constrained power system such as short term power purchases from independent power producers and municipal generators and the increased use of open cycle gas turbines”.
“These constraints have necessitated Eskom to explore options for further review of tariff increases for the 2015/16 financial year. Submissions in terms of the MYPD methodology have been made to Nersa in this regard,” it added in a statement.
Following consultations, Nersa would follow its “normal governance processes” before making a determination. Given that it would be a reopener, Nersa would likely hold public hearings on the proposed increases, but that could not immediately be confirmed by Engineering News Online.
As a precursor to what was likely to be a “prudency” review by Nersa’s, earlier this year, Eskom sought, and received, permission from the regulator to operate its open-cycle gas turbines (OCGTs) for up to 450 GWh.
The utility added that, in terms of the Municipal Finance Management Act, it would also consult with the National Treasury and the South African Local Government Association prior to submitting an application to Nersa for consideration.
“Further, the announcement by the Minister of Finance in the Budget Speech of the proposed increase in the environmental levy is yet to be promulgated. This will have an impact on the required tariff and as such Eskom will need an adjustment in terms of the tariffs due to the levy,” the utility concluded.