South Africa’s electricity pricing policy (EPP) review which has been initiated by the Department of Energy (DoE), will interrogate ways to “protect” the economy from “pricing shocks”, but was unlikely to entail a “complete revision” of the policy, Public Enterprises Minister Malusi Gigaba said on Monday.
Speaking at an Eskom briefing on the state of the system, Gigaba said officials from his department and those from the DoE were already involved in discussions on the new-look EPP, which would seek to balance the sustainability of Eskom with the growth and development needs of the economy.
Earlier, the National Energy Regulator of South Africa (Nersa) decided to postpone public hearings, scheduled for February 3, into its multiyear price determination methodology after receiving a letter from Energy Minister Dipuo Peters stating that government intended revising the EPP.
The current EPP was premised on a transition towards the long-run marginal cost within five years of its adoption. This informed the rate-of-return methodology, based on the replacement cost of the assets, that was used by Nersa to set yearly tariffs on a three-year rotation.
“We can’t give you a concrete deadline right away, but I’m sure at the right time we would be able to communicate . . . the timeframes and the programme we have agreed to,” Gigaba said.
He promised an “extensive consultative process” on the matter so that “when a determination is arrived at, there has been commendable effort to take into consideration all views that are relevant”.
Eskom CEO Brian Dames stressed that the utility had not yet finalised its tariff application for the period 2013 to 2016.
Such an application would have to be submitted to the Nersa during the course of the year for a determination to be made by year-end. Parliament was scheduled to approve the outcome by March 20, 2013.
The application would be submitted only once Eskom had completed a modelling exercise into the potential impact that further increases could have on economic growth and Eskom’s future sustainability.
The utility had indicated previously that it might seek an additional two years of increases in the 25% range, having already been granted three such yearly increases for the period starting April 1, 2010 and ending on March 31, 2013.
“The country and the world, from an economic perspective, is in a very difficult position – we understand that clearly. We understand the need for us to balance that and for us to be conscious of how do you create a viable Eskom and how do you create [conditions for] the introduction of new power generators into the market,” Dames said.
“Over the next few months”, Eskom would also seek “full alignment” between stakeholders on the approach that should be adopted to create sustainability and predictability, while offering confidence to investors, as well as those local and international bondholders currently funding Eskom’s expansion programmes.