Why Nersa snubbed Eskom

Pretoria - Eskom's application for an additional electricity price increase, on top of what has already been approved, was declined as it lacked the necessary information, the National Energy Regulator of SA (Nersa) said on Monday.

Chairperson Jacob Modise, announcing the decision before media and officials in Pretoria, said the power utility's application did not allow for the long-term planning the regulator sought.

"The application did not align with the credible long-term planning and certainty that the MYPD (multi-year pricing determination) seeks to achieve. Indeed, it works against such," he said.

READ: LIVE: The door is not closed to Eskom

The application did not indicate savings associated with a "low factor" of existing generation plants, the impact on the changes in the maintenance regime, and following that, poor plant performance. 

Nor did the application indicate the impact of the R23bn equity injection and the R60bn conversion to equity by government, the change in the demand for electricity, the availability and costs of alternatives to open cycle gas turbines (OCGT), changes in the MYPD assumptions, the economic impact of the proposed price increase, and other sources of funding, among others.

"Based on the available information and the analysis performed the energy regulator has decided as follows: Not to approve Eskom's application for the selective reopener of the MYPD 3 application for OCGT and short-term power purchase programmes and the impact on the increase on the environmental levy received on the April 30," he said.

"Eskom should submit an application for the adjustment in the allowed revenue in accordance with the MYPD methodology. Alternatively, a new application for the period April 1 2016 to March 31 2019 with indicative projections for the period April 1 2016 to March 31 2019."

Another problem was that the proposed price increases would not have been able to be implemented at municipal level for July 1 this year due to the lateness of the application.

Nersa did not increase the proposed price increase in the environmental levy as it was not gazetted and Eskom withdrew the application of the environmental levy during the public hearings.

Eskom had asked Nersa to approve a 9.58% price hike, which would have brought the total increase this year to over 22% after prices also rose in April.

Eskom, which imposes rolling blackouts on an almost daily basis due to inadequate electricity capacity, is facing a funding gap to 2018 of up to R200bn.

Eskom said in a statement it noted Nersa's decision.

"We will study the details of the determination and consult with the Shareholder before we can comment further on its impact,” said acting Chief Executive of Eskom Thava Govender. 

The increase was to fund higher usage of open cycle gas turbines (OCGTs) and cover the cost of buying capacity from the short-term power purchase programme (STPPP) in order to limit the severity of load shedding and the impact on the economy.

Eskom also announced that it will implement stage 1 load shedding from 16:00 on Monday.