Eskom tariff application in spotlight

THE National Energy Regulator of SA (Nersa) has set the ball rolling for the interrogation of Eskom’s recent application for tariff increases.

Nersa on Friday released an “issues paper” in which it has set the tone for future comments on the application by zooming into what are likely to be key talking points during the mandatory public participation process. These include rising operating expenditure, primary energy, and the effect of the increase on the economy and the poor.

Public comments on the application close at the end of this month . The public hearings will be held from January 11-22 and Nersa will, for the first time, hold public hearings in all provinces, it said, saying this was due to “unprecedented” public interest in the application. The body has said it would decide on the application on February 24, in time for the increase to take effect on April 1.

Eskom’s application for steep electricity price increases has provoked a public outcry.

Nersa said it had not yet formulated any opinions on the issues in the application and was only raising them so that stakeholders could give their opinions, the regulator said in its 25-page paper.

One issue that Nersa puts in the spotlight in the paper is Eskom’s soaring operating expenditure. Rising primary energy costs because of higher coal costs, increased utilisation of more expensive power plants, and logistical costs were key features in Eskom’s application.

“What are your views on these costs as presented in Eskom’s application?” Nersa asked.

The regulator also asked the public to comment on Eskom’s assertion that its capital expenditure programme would lead to an average annual increase in operating expenditure of 12,7% in the next five years, starting in the 2010-11 financial year.

Eskom has in the past come under fire for its handling of coal procurement as the utility has increasingly relied on coal bought through the more expensive short- term contracts. Eskom has also incurred logistical costs as the coal usually has to be transported by road from mine to power station.

Nersa said interested parties should comment on the feasibility of increasing mine production above contractual levels “for a few years” when contracted production is unable to meet the burn requirements of a power station.

Meanwhile, Nersa has approved the renewable energy feed-in tariffs phase 2. The approved tariff for a concentrated solar power trough without storage is R3,14/kWh, large- scale grid-connected photovoltaic systems (R3,94/kWh), biomass solid (R1,18/kWh), biogas (96c/kWh) and a concentrating solar power tower with storage of six hours a day (R2,31/kWh).

Nersa said it had excluded concentrating photovoltaic “at this stage” because of its high costs.

The regulator said the proposed power purchase agreement that was part of the feed-in tariff guidelines would be revised to be in line with the electricity regulations on new generation capacity, published in the g overnment g azette in August.

Among others, the regulations determine how a buyer and an independent power producer enter into a power purchase agreement.

njobenis@bdfm.co.za