Interdepartmental Team

Interdepartmental team to consider Eskom tariff approach


State-owned power utility Eskom is likely to apply for another considerable tariff increase to help fund its build programme, Department of Energy executive manager for the integrated national electrification programme, Dr Wolsey Barnard, said on Tuesday.

He told Engineering News Online at the fifteenth yearly Power and Electricity World Africa Conference and Exhibition in Sandton that Eskom would probably ask for another double-digit increase when it submits its tariff application under the third multiyear price determination MYPD.

Under the second MYPD, the National Energy Regulator of South Africa approved average electricity price increases of 25% for the period from April 1, 2010, to March 31, 2013. However, earlier this month, the regulator announced that Eskom’s tariff increase was reduced to 16% for 2012/13, rather than the previously approved 25.9%.

Barnard stated that tariff setting formed a crucial aspect of the regulatory framework in the local power sector and was key to attracting foreign investment and aiding development in South Africa.

“The lack of financing for infrastructure projects in Africa has some of its reasons anchored in the poor regulatory environment in most countries. We are keen to position South Africa as a preferred investment destination by providing a clear regulatory framework for the power sector. Assisting in achieving this is a thorough and adequate tariff setting process,” Barnard stated.

He said an interdepartmental team was considering the best approach for determining the next round of electricity tariff increases for Eskom, which is due to take effect in April 2013.

“The electricity pricing policy must make provision for Eskom tariffs to be increased in a manner that does not have an adverse impact on economic growth. The pronouncements of the president in the State of the Nation address will also be factored into the approach for defining a long-term electricity tariff trajectory,” Barnard assured.

President Jacob Zuma said in his February State of the Nation speech that he had asked Eskom to “seek options on how the price increase requirement may be reduced over the next few years, in support of economic growth and job creation”.

Meanwhile, Barnard said that the implementation of the Integrated Resource Plan (IRP) was well under way, as proven by the success of the renewable energy bidding programme for the procurement of 3 625 MW from independent power producers (IPPs).

“So far, the IPP process has lived up to expectations by attracting international investments to the value of about R100-billion,” Barnard enthused.

The first of the five windows in the bidding process was successfully concluded last year and it was announced that 28 preferred bidders would generate 630 MW of solar photovoltaic power, 150 MW concentrating solar power and 635 MW of wind energy.

A portion of the outstanding megawatts was offered in the second window that closed on March 5.

“We are set to initiate a fresh bidding round for the other technologies such as biomass, biogas, landfill gas, cogeneration and small hydro,” Barnard said.

Reacting to a question on whether South Africa thoroughly considered the challenges and dangers associated with nuclear power, highlighted by the Fukushima disaster, in Japan, last year, Barnard assured that safety concerns would be factored into the IRP, which provided for 9.7 GW of nuclear power.

“This will ensure that proper safety measures are put in place and that these are overseen by the appropriate expert authorities,” he stated.

Edited by: Mariaan Webb

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