‘Grant full 32% tariff or face the consequences, Nersa’
ESKOM yesterday warned the National Energy Regulator of South Africa (Nersa) to grant the full 32% tariff increase it requires in the 2023 year or face the consequences.
Appearing before Nersa in public hearings to justify its Multi Year Price Determination 5 Eskom said if the tariff was not granted the power utility would risk the further deterioration of its assets leading to load shedding.
This as the utility was not able to cater for its maintenance programmes with the current rates it was paid.
Kabelo Masike, a senior Treasury economist at Eskom, said that Nersa discounting elements of the proposal, including costs incurred, to give a lower determination only kicked the can down the road.
“The lower inflation tariff scenario is always the more favourable, but the shortfall has to be made up for in some way somewhere down the line, whether it is through increases taxes or some kind of injections from the shareholder, which is the government.
“The middle option is borrowings, which attract further service costs. We are asking Nersa to give us a tariff that reflects the cost of producing the electricity,” Masike said. He emphasised that the World Bank had also noted that in several African countries the energy crises was in part propelled by the huge difference between the tariff and the cost incurred in production.
“If we do not have the tariff we asked for, it is only a matter of time before we are in the same situation again. We have exhausted the capacity of the assets and we still want higher production from them. If we do not take the assets out for maintenance, they soon take themselves out,” Masike said.
He said expectations were that the 32% increase would help in a 0.6% increase in the gross domestic product as Eskom would be able to be more efficient in producing electricity, about 80% of which was consumed by industry and agriculture, productive sectors of the economy.
The growth prospect was a bitter pill for swallow for Nersa Commissioner, Precious Sibiya, who questioned if the projections had been made with consideration of the current load shedding programme, which peaking at stage 6 had cost the industry and economy in lost production times.
Masike's assertions were also met with incredulity by Nersa commissioners who questioned the continuously deteriorating energy availability factor (EAF), which has slipped from 75% to a low of 59% now.
Chief Commissioner Muzi Mkhize said, “Where do you draw the line with the EAF? It was at 75%, then it was 72% and then we were told it was at 67%, now it is at 59%. Where do you draw the line when the standards keep on declining?”
Eskom chief financial officer Calib Cassim said there was a large adaptation in the intensity of electricity used, which indicated that consumers had either improved their energy efficiency or has switched to alternatives.
He said there had been changes made initially with the application before Eskom and Nersa locked horns with the courts issuing a favourable decision that Nersa add R15 billion per year to Eskom's revenue prospects in 2024 to 2026 and R14bn in 2027.
He said by Eskom's projections Medupi's unit 4, which last year blew a generation unit due to personnel negligence would return to operation in August next year, while Kusile's units 5 and 6 commissioning dates were slated for May next year.
The Energy Intensive Users Group said it was concerned about the affordability of Eskom's application because 32% had a significant impact on members' operations considering that for some electricity represented 40% of costs.