Energy regulator Nersa’s proposed new technique for figuring out electrical energy tariffs will result in much higher electrical energy tariffs, and the toughest hit will be households – particularly poor ones.
This warning comes from Eskom in a 76-page response to the session paper Nersa printed on 30 June.
The session paper invited written feedback by finish of July, however Nersa prolonged the deadline to 12 August after appeals by a number of stakeholders, together with the Energy Intensive User Group.
Read: Stakeholders need extra time to research new electrical energy tariff methodology
Three digital public hearings on the paper are deliberate for 10, 11 and 12 August, and Nersa hopes to publish the finalised methodology by 30 September.
In a press release asserting the extension, Nersa emphasised that the methodology will apply not simply to Eskom, however to the entire electrical energy business.
This means the methodology will additionally must be carried out by municipalities, a lot of that are dysfunctional and lack expert workers.
The Nersa assertion additional clarified its intention that the brand new methodology will be carried out in a phased method, versus a “big-bang approach” that Eskom has warned towards.
“It is envisaged that once the methodology has been approved, an appropriate transition period will be allowed, as has happened in the past, to enable the industry to adapt to the new EPDM [electricity price determination methodology] over time,” Nersa said.
New methodology?
Although politely worded, Eskom’s touch upon the Nersa doc is scathing.
The utility stops in need of telling the regulator that it has no clue what it’s doing and doesn’t perceive how electrical energy works.
Eskom doesn’t even recognise that the session is geared toward a brand new tariff willpower methodology – as a substitute describing it as “the first step towards the process to develop” one.
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Eskom additional factors out that many ideas haven’t been correctly outlined and sure phrases that Nersa makes use of interchangeably in reality have completely different meanings.
Principles
The regulator’s proposal is predicated on three rules that it accredited in November final 12 months.
Nersa lists them as follows:
a) Unbundling of actions throughout the worth chain actions (vertical) and throughout actions [sic] (horizontal) to set cost-reflective tariffs;
b) Understanding shopper demand (load sorts) and, demand over time (load profiles); and
c) Discovery of cost-reflective shopper costs via advantage order dispatch and build-up from the tariffs alongside the worth chain.
According to Eskom these rules are “not appropriate to meet the Nersa mandate of ensuring that licensees recover efficient costs and a fair return”.
“These are not regulatory approaches at all,” says Eskom.
The energy utility factors out that its present tariffs should not but reflective of its prudent value of provide. If the brand new methodology fails to offer for a path from the present tariff ranges to value reflectivity, it will result in a pointy improve in tariffs – a big-bang method, it states.
Other issues …
Eskom additional factors out that the elimination of cross-subsidisation, which appears to be a part of the proposal, will profit industrial prospects to the detriment of households.
It warns towards plans by Nersa to put the complete threat of lower-than-forecast gross sales volumes on the utility, and says in that case it will have to make sure that the restoration of mounted fees is not linked to the gross sales volumes. This, it says, will affect small customers most.
“The likely outcome would be a substantial increase in prices.”
Eskom additionally raises the opportunity of passing the chance on to, particularly, bigger prospects, who will must “take accountability for the forecasts they provide”.
Confusion
Eskom seemingly battled to familiarize yourself with what precisely the regulator needs, saying: “For the purpose of understanding the apparent objectives of this consultation paper, the impossible, the inappropriate and the violation of policy, legislation, regulatory rules and codes are excused.”
It repeatedly states that what Nersa has in thoughts has not been carried out anyplace else in the world and is non-compliant with present laws and regulatory devices.
It states: “This Consultation Paper is in contradiction with the existing Distribution Tariff Code. These [contradictions] include concepts introduced in this Consultation Paper that have never been encountered previously, anywhere in the world, such as type of use tariffs.”
Follow the electron?
In response to a query Nersa put to stakeholders about its plans to gather information from finish customers to analyse their demand, Eskom says: “A request is being made by Nersa to ‘follow the electron’. It is unclear why an impossible request is being made. A thorough understanding of the manner in which […] electricity works needs to be appreciated.”
Eskom is vital of Nersa’s plan to hyperlink particular load or demand sorts to the price of particular producing models.
“As demand for electricity increases, more expensive generation must be dispatched to meet this demand. The last generator dispatched does not exclusively supply the last consumer requiring power but both now participate, simultaneously, with all other generators and consumers at that moment in time. From the above, it is clear that no consumer or group of consumers can be mapped or be deemed to be supplied from any generator or group of generators.”
Eskom explains to Nersa that transmission and distribution prices should not pushed by the quantity of power transmitted, however by capability created and maintained to allow a protected and dependable community operation to service all contributors.
It proposes that the present methodology “that has been applied for many years” be used “as the basis for any further review as far as determining efficient costs and a fair return are concerned”.
It provides: “It is submitted that most of the ideas and ideas that this session needs to implement are wrongly positioned. This outcomes in unimaginable necessities for the entire business.
“It is proposed that the existing framework, appropriately applied could provide the envisaged outcomes.”
Eskom’s criticism of the Nersa proposal comes towards the background of an extended record of Nersa tariff selections efficiently challenged by Eskom in courtroom.
Indications are that ought to Nersa persist in implementing its present proposals, Eskom will as soon as once more see its regulator in courtroom.