Price increase

Last week, South Africa’s parastatal power company Eskom confirmed an electricity tariff increase of 12.69% for direct consumers with effect from 1 April 2015 and 14.25% for municipalities from 1 July 2015.

National Energy Regulator of South Africa (Nersa) approved the price hikes in November 2014.

Eskom said in a statement that its current financial status is due to past non-cost reflective tariffs.

The utility also said the delay in recovery of eligible expenditure does not allow the power company’s balance sheet “the ability to pre-fund further costs that are necessitated by a constrained power system such as short term power purchases from independent power producers and municipal generators and the increased use of open cycle gas turbines.”

Eskom said these restrictions are pushing the energy provider to seek alternative solutions for the review of tariff increases for the 2015/16 financial year.

Submission process

Eskom submitted a multi-year price determination (MYPD) methodology to NERSA for a third time in October 2012 to determine an increase in electricity tariffs.

Eskom stated that it has “initiated a selective reopener of the MYPD 3 application from the 2015/16 financial year onwards that proposes an adjustment in the tariffs. This is due to costs incurred securing further short-term power purchases and increased use of open cycle gas turbines.”

In a company statement Eskom explained: “In terms of the Municipal Finance Management Act (MFMA), Eskom is required to first consult with the National Treasury and the South African Local Government Association (SALGA) prior to submitting to Nersa for consideration. Eskom will consider these comments before submitting to Nersa. Nersa will then follow their normal governance processes before making a decision.”

New agreements for coal-fired plant

Kusile coal-fired power station in Mpumalanga, South Africa
Kusile coal-fired power station in Mpumalanga, South Africa

In addition to tariff increases Eskom announced the termination and new agreement for the control and instrumentation contract (C&I) at the Kusile coal-fired power plant on Friday.

As of 17 April 2015 the agreement between Eskom and Alstom S&E Africa will be dissolved with immediate effect.

Eskom said in a statement: “ABB was selected from two suppliers which were evaluated as part of an extensive procurement process executed in parallel with the negotiation and subsequent consensual termination of the C&I Contract.”

“This procurement process, which has now been finalised, included an early design process and was focused on ensuring schedule security and the seamless introduction of an alternative contractor for Kusile,” Eskom added.

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