New ESKOM tariff application

SOUTH AFRICA – We could also be headed for another increase on electricity tariffs as power utility ESKOM would submit a new and ‘final’ tariff application to the National Energy Regulator of South Africa (NERSA) by November 30, following consultations with stakeholders, Engineering News Online has confirmed.

It has become a norm that when ESKOM increases it’s tariffs, the country gets affected the same way when fuel prices drop or hike in South Africa. There was no immediate comment from local company SEC on the matter.
In the ESKOM matter, it was unclear, however, whether this revised version would deviate materially from the initial application, which was submitted to NERSA on September 30, as well as to the National Treasury and the South African Local Government Association (SALGA).

Public Enterprises Minister Barbara Hogan indicated yesterday that the utility had been asked to re-look at the application, “to be absolutely sure that those are the tariff increases that ESKOM does really need”.
Speaking on SABC radio yesterday morning, Hogan highlighted that the tariff application was a top priority for the corporation, following the partial resolution of the leadership crisis at the utility.

ESKOM’s top 60 managers met in Johannesburg this week to put the final touches to the application following consultations with the National Treasury, SALGA and others. The initial version sought increases of 45 per cent a year for the three-year period between April 2010 and the end of March 2013.

Acting ESKOM chairperson Mpho Makwana said on Thursday that the group was “in the process of preparing for a very important tariff application”.
“Once we are ready to share details around this application we will do so,” he said.

Makwana would act as executive chairperson until a replacement for Jacob Maroga, whose resignation had been accepted by the ESKOM board, was secured. However, it was also possible that former chairperson Bobby Godsell, who resigned on November 9, might return, with Hogan having indicated that he would be requesting him to reconsider his position over the weekend.

There had been considerable opposition to the ESKOM application ever since it was submitted to NERSA within the framework of the second multiyear price determination, or MYPD 2.
However, Hogan and Makwana’s remarks implied that a revision was indeed on the cards.
ESKOM spokesperson Andrew Etzinger confirmed with Engineering News Online that a “final application” would be submitted by the end of November, but said that he could not comment on the details as these were still being finalised.

Any lower application would imply that ESKOM had been able to secure additional support from its shareholder, the South African government, or, alternatively, that projects, such as Kusile, had been either deferred or cancelled. However, it is also understood that ESKOM is seeking other form of support, possibly involving private equity.
It was also not immediately apparent whether NERSA would have to revise it’s already published timelines for the review of the application and the accompanying public participation process.

NERSA spokesperson Ryna Boshoff said that the regulator had “noted the statement” by the Minister, but that it had not received a revised application from ESKOM.
Hints of a possible change to ESKOM’s stance began emerging over the past few weeks, especially from within South Africa’s energy-dependent mining sector.

Speaking in the UK earlier in the week, AngloGold Ashanti CEO Mark Cutifani was quoted by Reuters as saying that, the South African government was expected to reject a proposal by Eskom to triple tariffs, partly because of the impact they would have on the gold sector.

Further, Engineering News Online reported that South Africa’s Chamber of Mines (CoM) was calling for a new electricity dispensation for the country to ensure that “ESKOM does not remain both the player and the referee”.
CoM CEO Zoli Diliza said that Eskom’s proposed electricity tariff of 45% a year for the next three years was “unacceptable” and that the industry stood ready to “engage with government and Eskom to find ways that can look at how best the issues can be mediated”.

He urged that government considered the possibility of separating the transmission of electricity from the generation of electricity, and advocates that an independent entity be established to manage transmission.
In a similar vein, the South Africa Chamber of Commerce and Industry met with Eskom on Thursday, where it raised “alternative approaches” to addressing the country’s electricity supply challenges.

Separately, there was also a strong push for the creation of an independent system operator, backed by government guarantees. Such a body, should it be established, could sign power purchase agreement with non-Eskom suppliers so as to overcome the conflicts of interests that were likely to occur if such procurement was conducted through Eskom’s so-called single buyers office.