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Cape Town - MPs are cautiously optimistic about the National Energy Regulator of SA's (Nersa's) determination of electricity tariffs, parliament's energy portfolio committee chairperson Sisa Njikelana said on Wednesday.
"It's worth looking at with a smile. I caution and qualify my response because we still have to get Eskom to respond to it," Njikelana said after Nersa briefed the committee on the power price determination process.
Nersa assured the committee that Eskom would not be bankrupted by the decision to increase electricity tariffs by 8% over the next five years.
Eskom had requested a 16% a year price increase.
Nersa officials told MPs the increase allowed would still enable Eskom to continue paying its loans for capital projects.
Eskom's profit margins, calculated on the Earnings, Before Interest, Taxes, Depreciation and Amortisation (EBITDA)-to-interest ratio, was expected to drop from around 2.5 next year to just below 2 by 2016, recovering slightly by 2018.
"What Eskom wanted and what ratings agencies would say they would want for Eskom... your EBITDA-to-interest cover ratio should be above 2.5, or even go to 3; when it is there they know you'll be able to cover all of your costs and all of your commitments," said the regulator's member for electricity, Thembani Bukula.
Bukula said Nersa's determination showed that even without reaching the 3, Eskom would still be able to pay its funders.
"What we are showing here is that in what we've allowed Eskom is that they would still be able to cover all of their costs... pay for their loans, pay for their interest, but that ratio would not sit at the 2.5 that they would want," he said.
Nersa also confirmed to MPs that included in the determination was a refusal to allow Eskom to charge consumers for its power buy-back programme.
Bukula said buy-back agreements with major industrial users had proved to be counter-productive.
The programme allowed Eskom to buy-back power from major users to curb usage when the electricity grid was tight.
"The buy-back was an amount of R8.9bn that Eskom was putting in the tariff to say when they want to do maintenance on their plants, they would go to a company and say, don't produce what you are producing, we are going to pay you... that is what is not allowed," Bukula said.
Nersa gave various reasons why the programme was "inefficient".
"When companies are not allowed to produce, then employees will not earn a salary, the ones who are transporting them will not earn... ," he said.
"We would give them the whole R8.9bn if they were to improve the productivity of their own system, the efficiency of their own systems, and also improve the viability of their own power plants."
Independent Democrats MP Lance Greyling told the committee Nersa had made the right move, but asked whether this decision would not lead to greater pressure on the power grid.
"I think it's quite an absurd situation at the moment where we are paying companies 87 cents a kilowatt hour not to produce. But clearly we are in crisis at the moment, where the reserve margin is at 1%," Greyling said.
He asked whether Nersa was confident that Eskom could continue to keep the lights on without having to participate in the buy-back programme.
Bukula said there were alternatives, which were tested in other countries which had similar "power constrictions".
"They speak to the big businesses and one of the things they would do is to say to you is business number one, your week is no longer going to be Monday to Friday... you end on Thursday, you rotate them and keep the load low," said Bukula.
