The proposed tariff increases by state power utility Eskom are "deficient" and "dishonest" and should be rejected‚ says energy expert Chris Yelland.
In a submission to the National Energy Regulator of South Africa (NERSA)‚ he states that the question of affordability to the customer‚ be it to ordinary citizens or to the productive economy‚ is completely ignored by Eskom in its application for a tariff hike.
He also argues that by Eskom’s own admission the additional‚ unbudgeted costs of diesel and STPPP energy costs that the utility wants to pass through to the customer in the tariff results directly from its own failings.
Therefore‚ Yelland says‚ "by no stretch of the imagination" can such additional costs be considered as prudently and efficiently incurred‚ and that they should therefore be rejected by NERSA.
Furthermore‚ Yelland adds‚ the extra diesel and STPPP costs claimed by Eskom are grossly overstated and neglect all corresponding offsetting cost reductions that are applicable.
In an example in his submission‚ Yelland recalculates the net diesel and STPPP costs taking these offsets into account‚ and shows that the net cost is in fact a small fraction of the amount that Eskom has claimed.
On May 8‚ Eskom made an urgent application to Nersa to increase the electricity tariff by 25.3% for the 2015/2016 financial year‚ including the 12.69% price increase that has already been approved.
Eskom applied to the regulator for the selective reopening of the Third Multi-Year Price Determination decision for the 2015/2016 to 2017/2018 period because it required cost recovery of R32.9bn for open-cycle gas turbines and R19.9bn for the short-term power purchase programme.
Eskom wants a 10.10% selective reopener for open-cycle gas turbines and the short-term power purchase programme and a 2.51% increase in the environmental levy by 2 cents per kilowatt-hour.
In his submission to the national energy regulator‚ Yelland
also points out that the assumption by Eskom that additional diesel costs are the most cost effective solution to meeting generation capacity shortfalls in 2016‚ 2017 and 2018‚ is "also almost certainly not correct".
He says that no alternative mitigation techniques (such as integrated demand side management‚ demand market participation‚ power buy-backs‚ increased renewable energy procurements‚ power ships‚ conversion of OCGT diesel fuel to imported liquefied natural gas‚ increased industrial cogeneration‚ etc.) are presented or considered in Eskom’s application for a "selective reopener" to MYPD 3.
"It would appear therefore that Eskom has simply chosen‚ in its own interests‚ to maximise its price increase by including the most expensive option of all (diesel) for the next three years‚ even though it is likely that cheaper options will almost certainly be used in 2016/17 and 2017/18‚" Yelland asserts.
According to Yelland‚ the meaning of the term "selective reopener" in Eskom’s mind therefore becomes clear: Eskom gets to select the highest possible costs that should be passed through to the customer for the next three years; and Eskom also elects to ignore any cost offsets that may benefit the customer.
As such‚ Yelland says that Eskom’s application to NERSA for a "selective reopener" of MYPD 3 can be seen "not only to be deficient‚ but also dishonest‚ and should be rejected".
Proposed Eskom hikes “deficient and dishonest”: energy expert
In a submission to the National Energy Regulator of South Africa (NERSA)‚ he states that the question of affordability to the customer‚ be it to ordinary citizens or to the productive economy‚ is completely ignored by Eskom in its application for a tariff hike.
He also argues that by Eskom’s own admission the additional‚ unbudgeted costs of diesel and STPPP energy costs that the utility wants to pass through to the customer in the tariff results directly from its own failings.
Therefore‚ Yelland says‚ "by no stretch of the imagination" can such additional costs be considered as prudently and efficiently incurred‚ and that they should therefore be rejected by NERSA.
Furthermore‚ Yelland adds‚ the extra diesel and STPPP costs claimed by Eskom are grossly overstated and neglect all corresponding offsetting cost reductions that are applicable.
In an example in his submission‚ Yelland recalculates the net diesel and STPPP costs taking these offsets into account‚ and shows that the net cost is in fact a small fraction of the amount that Eskom has claimed.
On May 8‚ Eskom made an urgent application to Nersa to increase the electricity tariff by 25.3% for the 2015/2016 financial year‚ including the 12.69% price increase that has already been approved.
Eskom applied to the regulator for the selective reopening of the Third Multi-Year Price Determination decision for the 2015/2016 to 2017/2018 period because it required cost recovery of R32.9bn for open-cycle gas turbines and R19.9bn for the short-term power purchase programme.
Eskom wants a 10.10% selective reopener for open-cycle gas turbines and the short-term power purchase programme and a 2.51% increase in the environmental levy by 2 cents per kilowatt-hour.
In his submission to the national energy regulator‚ Yelland
also points out that the assumption by Eskom that additional diesel costs are the most cost effective solution to meeting generation capacity shortfalls in 2016‚ 2017 and 2018‚ is "also almost certainly not correct".
He says that no alternative mitigation techniques (such as integrated demand side management‚ demand market participation‚ power buy-backs‚ increased renewable energy procurements‚ power ships‚ conversion of OCGT diesel fuel to imported liquefied natural gas‚ increased industrial cogeneration‚ etc.) are presented or considered in Eskom’s application for a "selective reopener" to MYPD 3.
"It would appear therefore that Eskom has simply chosen‚ in its own interests‚ to maximise its price increase by including the most expensive option of all (diesel) for the next three years‚ even though it is likely that cheaper options will almost certainly be used in 2016/17 and 2017/18‚" Yelland asserts.
According to Yelland‚ the meaning of the term "selective reopener" in Eskom’s mind therefore becomes clear: Eskom gets to select the highest possible costs that should be passed through to the customer for the next three years; and Eskom also elects to ignore any cost offsets that may benefit the customer.
As such‚ Yelland says that Eskom’s application to NERSA for a "selective reopener" of MYPD 3 can be seen "not only to be deficient‚ but also dishonest‚ and should be rejected".
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