Nersa says it considered everyone in Eskom tariff move

Cape Town  - The National Electricity Regulator of South Africa (Nersa) had to perform a delicate balancing act, weighing up the various needs of electricity consumers and providers in making its decision on an additional tariff hike for Eskom, said Thembani Bukula.

Nersa was called before Parliament’s Portfolio Committee on Energy 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.

This means Eskom customers will pay 9.4% more for electricity from April 1 this year. If Eskom had not applied for an additional increase, tariffs would have been 3.5% more.

Responding to questions from MPs who accused Nersa of not taking public interest into account, Bukula said the regulator is required to balance the interest of investors, Eskom and customers who consume 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. “Had Medupi delivered power to the grid earlier, Eskom might have not been forced to use open cycle gas turbines.”

The diesel-powered open cycle gas turbines are 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.

During question time, Nersa was asked whether Eskom’s regulatory clearing account (RCA) mechanism - the regulatory mechanism that reconciles the difference between projected and actual revenue and certain costs - is actually working.

Bukula admitted that the RCA mechanism was not functioning properly at present. “It was working in the first two years, but when Eskom started deviating from the completion dates of Medupi and Kusile it didn’t work,” he said.

No costing models yet on nuclear

Democratic Alliance MP Gordon Mackay asked Nersa if they had done any modelling on the cost of running nuclear power plants, following government’s consideration of a nuclear build programme.

Bukula admitted that no costing models have been done yet. “We don’t know what it will cost to generate 9.6 Gigawatts of nuclear energy. But it would take up to 15 years to get the first unit operational, that’s why we haven’t focused on the modelling yet.”