Category Archives: NERSA

National Energy Regulator of SA

Amendment to the SA Electricity Regulation Act – 10 November, 2017

Government Gazette, 10 November, 2017

(Ed. note: with thanks to EGSA contributors, James Reeler, Robyn Hugo and others)

Basically, it allows certain installations under 1MW to connect to the grid (or to operate off-grid) without need for a licence under a set of circumstances, which include:

  1. Registration with NERSA, and
  2. That the minister has not declared that the IRP requirement for embedded generation of the specified type has not been reached.

So all embedded generation, small and large, is linked directly to the IRP, and will make any grid-connected SSEG dependent on the total amount detailed therein.

Exemptions from the requirement to be licensed with NERSA:

Exempt from a licence:

– Generators Less than 1MW that don’t wheel, or wheel, or off-grid
+ Must have a Needs use-of-system agreement with grid operator
+ Will have an IRP allocation and minister can cap (not applicable to off-grid)

– Demonstration facilities
+ But may not operate for longer than 36 months

– Generators who produce from waste products (eg sugar bagasse)
+ but must be on-site

– Facilities for standby / backup during a grid interruption (eg diesel gensets)

– Existing facilities

– Distribution facility exclusively for wheeling

– Electricity resellers
+ where tariff is same or less than what would normally be
+ and there is an agreement with the local distribution company
+ and is approved by NERSA

Note that:

1MW projects were previously not capped, they are now capped by IRP determination (except off-grid)
1-10MW category is gone

Here is a link to the gazetted amendments

Eskom’s death spiral looms large

Mail and Guardian, Lynley Donnelly, 13 October, 2017.

Eskom is facing a fundamental crisis that is only being exacerbated by allegations of corruption and the leadership vacuum at the state power company.

Almost half of the latest tariff increase Eskom has asked for is aimed at making up for the power utility’s dropping sales.

n its latest tariff application to the National Energy Regulator of South Africa (Nersa), the power utility requested an increase of 19.9% for the 2018-2019 financial year, which will take its standard tariff from about 89c per kilowatt-hour to almost R1.07/kWh.

About 9.4% of this increase is accounted for by what Eskom terms “sales volume rebasing” — or the declines in electricity sales.

This rebasement, as well as a price adjustment of 5.5% because of further increases to cover independent power producer (IPP) costs, comes before some of Eskom’s other major expenses, such as primary energycosts — mainly coal — are even contemplated.

It is also seeking a 27% tariff increase for municipalities.

As tariffs rise, the problem of plummeting sales is only likely to worsen.

Critics have complained that, although a range of factors may have contributed to customers cutting their electricity consumption, this is aggravated by Eskom’s own inefficiencies, which have forced up prices.

Not least of these has been the rapid increases in tariffs to pay for a capital expansion programme that has been dogged by cost overruns and delays.

Eskom’s need to cover for falling sales arguably hints at what has become known globally as the utility death spiral — when customers switch to alternative, off-grid electricity sources that are increasingly competitive, forcing utilities to ask regulators to increase tariffs. In turn, more customers look for cheaper alternatives and utilities must rely on an ever-declining revenue pool.

In its feedback on Eskom’s application to hike tariffs, the treasury also alluded to this looming problem.

Its research found that 26% of residential electricity sales could be off-grid by 2030. This was based on a moderate tariff increase path of 10% a year for the coming five years.

From an analysis of listed companies, the treasury estimated the equivalent of up to 34% of mining, 8% of industrial and 1% of commercial electricity generation sales currently supplied by Eskom could potentially go off-grid by 2040.

These effects would be driven by the mitigation strategies put in place by households — particularly high-income households — and firms in response to rising electricity prices, it noted.

But Eskom’s requested increase has also coincided with a series of corruption scandals and four chief executives since the start of 2017.

Most recently, Eskom all but admitted to paying consultancies McKinsey and Trillian — the latter was previously linked to controversial Gupta family associate Salim Essa — about R1.6‑billion in unlawful payments.

The parastatal has also been plagued by allegations of corrupt coal procurement processes — including preferential treatment for Gupta-linked companies. In its financial results, almost R3‑billion was revealed to have been spent in contravention of the Public Finance Management Act.

Link to the full article.

‘Rebasing’ for lower Eskom sales to trigger 9.4% hike even before any revenue adjustment

Engineering News, 20 September, 2017.

State-owned electricity utility Eskom has sounded a warning that, even if its allowable revenue is not increased at all for the 2018/19 year, tariffs will still need to rise by 9.4% simply to accommodate a “rebasing” of electricity sales volumes when compared with those approved in the third multiyear price determination period (MYPD3).

The utility has made a single-year application to the National Energy Regulator of South Africa (Nersa) for allowable revenue of R219.5-billion, which would translate to a hike of 19.9% from April 1 for direct customers and 27.5% for municipalities from July 1.

The submission, which is available on Nersa’s website, includes a request for R13.2-billion in higher operating expenses, R11.2-billion in additional independent powerproducer (IPP) costs, a R1-billion increase in primary-energycosts and R2.8-billion for international purchases. Even after “sacrificing” R12-billion in its return-on-assets request, based on a decision to “phase-in” its weighted average cost of capital over time, and factoring a R1.8-billion reduction in the environmental levy, owing to a fall in the amount of energysent out, its submission still translates to what would be a significantly above-inflation hike from April 1.

(Ed. note: And down the slippery slope we go – the higher the electricity tariffs, the less electricity we use, the higher the electricity tariffs – until everyone who can gets off the grid and Eskom and the municipalities are left with customers who can’t pay! Time for a new business model for our electricity utilities.)

Here is the full article

Eskom’s 20% uses ‘impossible’ assumptions

Fin24, 11 June, 2017.

Eskom’s plans to ask for a 20% tariff increase for next year assumes higher economic growth than just about anyone expects – and assumes a physically impossible doubling of sales by renewable energy independent power producers (IPPs), despite Eskom actively fighting against their coming online.

It also assumes that Eskom will get rid of about ­­4 300 workers – 10% of its workforce – by March 2019 by not filling the posts left vacant when a member of staff retires.

These assumptions make the application likely to once again result in an enormous additional tariff request later on using the so-called Regulatory Clearing Account (RCA), which is a monitoring and tracking mechanism that compares certain uncontrollable costs and revenues with actual costs and revenues incurred by Eskom.

A confidential draft of Eskom’s planned application for next year’s tariff hike to the National Energy Regulator of SA (Nersa) made its way into the public domain this week. It spells out all the mechanics regarding how the utility came to the 20% figure.

Here is the full article

Eskom wants Nersa to consider two outstanding RCA applications in wake of court ruling

Engineering News, 7 June, 2017.

(Ed. note: Oh no, here we go again. Eskom, DOE and the DPE are well and truly stuck in the mire of their past actions.)

State-owned electricity utility Eskom believes the decision of the Supreme Court of Appeal (SCA) to upheld an appeal by National Energy Regulator of South Africa (Nersa) and Eskom relating to implementation of a clawback mechanism in South Africa’s tariff-setting methodology opens the way for regulator to consider two further regulatory clearing account (RCA) applications that have been held in abeyance amid legal uncertainty…

.. It is also not immediately clear what would become of the one-year revenue application, for 19.9%, which Eskom was preparing to submit for the 2018/19 financial year. Should Nersa reconsider the outstanding RCA applications, and should Eskom receive clawback relief, it would have a material impact on Eskom’s 2018/19 application…

Here is the full article (or you could just wait for the dust to settle and see what happens!)