Eskom has submitted an application to the National Energy Regulator of South Africa (NERSA) to increase the electricity price by a further 12,61% over and above the 12,69% increase that came into effect on 1 April this year, making it a total of 25,3% for the 2015/16 financial year ending 31 March 2016.
Chris Yelland, investigative editor at EE Publishers, has made a comprehensive submission to NERSA in response to Eskom’s application for a “selective reopener” of NERSA’s multi-year price determination (MYPD 3), for the period 1 April 2015 to 30 March 2018
In his submission, Yelland states that the question of affordability to the customer, be it to ordinary citizens or to the productive economy, is completely ignored by Eskom in its application.
>He further states that by Eskom’s own admission the additional (unbudgeted) costs of diesel and STPPP energy costs that the utility wants to pass through to the customer in the tariff result directly from its own failings. Therefore, Yelland says that by no stretch of the imagination can such additional costs be considered as prudently and efficiently incurred, and they should therefore be rejected by NERSA.
Furthermore, Yelland says the extra diesel and STPPP costs claimed by Eskom are grossly overstated and neglect all corresponding offsetting cost reductions that are applicable. In an example in his submission, Yelland recalculates the net diesel and STPPP costs taking these offsets into account, and shows that the net cost is in fact a small fraction of the amount that Eskom has claimed.
Yelland also points out that the assumption by Eskom that additional diesel costs are the most cost effective solution to meeting generation capacity shortfalls in 2016, 2017 and 2018, is also almost certainly not correct.
He says that no alternative mitigation techniques (such as integrated demand side management, demand market participation, power buy-backs, increased renewable energy procurements, power ships, conversion of OCGT diesel fuel to imported liquefied natural gas, increased industrial cogeneration, etc.) are presented or considered in Eskom’s application for a “selective reopener” to MYPD 3.
It would appear therefore that Eskom has simply chosen, in its own interests, to maximise its price increase by including the most expensive option of all (diesel) for the next three years, even though it is likely that cheaper options will almost certainly be used in 2016/17 and 2017/18.
According to Yelland, the meaning of the term “selective reopener” in Eskom’s mind therefore becomes clear: Eskom gets to select the highest possible costs that should be passed through to the customer for the next three years; and Eskom also elects to ignore any cost offsets that may benefit the customer.
As such, Yelland says that Eskom’s application to NERSA for a “selective reopener” of MYPD 3 can be seen not only to be deficient, but also dishonest, and should be rejected.