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Eskom: It's not us holding back Nersa tariff report

Mar 29 2016 17:08
Dane McDonald

Cape Town - Eskom is not the reason why the Nersa report on tariff hikes has not been released to the public, according to the utility's spokesperson Khulu Phasiwe.

Phasiwe said the National Energy Regulator of South Africa (Nersa) asked Eskom to comment on whether the utility is comfortable with the information being disclosed.

"We responded two weeks ago that they can go ahead on all issues except special pricing regarding the BHP Billiton contract. We are not the reason the information has not been made public," he told Fin24.

The Organisation Undoing Tax Abuse (Outa) on Saturday said it had no other choice but to obtain an interdict against an increase in electricity tariffs on April 1 2016 as "Nersa declined to provide details around the decisions that gave rise to the higher tariff".

Meanwhile, Nersa cited possible "confidential" information which it must first clear with Eskom, before they are allowed to release parts of the information to the public.

Outa fears that the answers will only come to the fore well after the 9.4% electricity tariff increase had been implemented and well outside the period the public is able to assess and comment on the validity of the reasons for their decision.

The group has decided to approach the North Gauteng High Court in an attempt to obtain an interdict against the implementation of the increase.

The matter will be heard on Thursday March 31.

Reasons for tariff hike

Head of energy regulation at Nersa Thembani Bukula told Parliament’s Portfolio Committee on Energy on March 8 that the regulator had to perform a delicate balancing act, weighing up the various needs of electricity consumers and providers in making its decision.

Nersa was called before portfolio committee to explain the rationale behind the decision to grant Eskom an additional R11.2bn in revenue for 2016/17 – 50% of the amount the power utility had requested.

Responding to questions from MPs who accused Nersa of not taking public interest into account, Bukula said the regulator was required to balance the interest of investors, Eskom and customers who consumed electricity from Eskom.

“We will eventually get to a point where (the coal-fired power station) Medupi is functioning. Then there may be clawbacks in terms of tariffs,” Bukula said at the time. “Had Medupi delivered power to the grid earlier, Eskom might not have been forced to use open cycle gas turbines.”

The diesel-powered open cycle gas turbines were by far the biggest item on Eskom’s expense account on which it spent more than R8bn over the amount it had budgeted for. Eskom said it used the diesel turbines to “keep the lights on” in the absence of the coal plants Medupi and Kusile.

BHP Billiton special pricing

Phasiwe said there was an issue around special pricing with BHP Billiton [JSE:BIL], an Anglo-Australian multinational mining, metals and petroleum company headquartered in Perth.

"The matter has not been resolved, Eskom wants to review and/or cancel the contract and we have asked the regulator about the volumes being used and how much they are paying," he said.

By April 2013 Eskom had already recorded a loss of R10.7bn through supplying electricity to Hillside, the bigger of the two aluminium smelters at BHP Billiton.

Hillside uses 1 200 MW, which makes it the third-biggest electricity user in the country. This usage is surpassed only by the cities of Cape Town and Durban, which each uses 1 300 MW.

Based on the formula agreed to determine the price at which Eskom had to supply electricity to the smelters, Hillside paid about 22.65c per kilowatt hour (kWh) for two-thirds of the 1 200 MW it uses, as opposed to R1.40/kWh charged to normal consumers.

The deal was concluded in 1992.

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest. 24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

nersa  |  outa  |  eskom  |  bhp billiton  |  tariff hikes  |  electricity

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