A joint Eskom, Department of Public Enterprises (DPE) task team would “within weeks” deliver its verdict on the implications of the regulator’s February decision to grant the utility yearly tariff increases of 8% between 2013 and 2018 instead of the requested 16%.
The recommendations arising from the analysis could include policy proposals related, for instance, to issues such as the implementation of a mandatory energy conservation scheme (ECS), as well as suggestions of possible further shareholder support for the State-owned utility.
Minister Malusi Gigaba indicated on Monday that Eskom would be expected to work within the price constraints outlined in the National Energy Regulator of South Africa (Nersa) determination, which he described as being “fair for customers, but difficult for Eskom”.
“It is clear the Nersa decision changes the game significantly,” he said.
In order to “live within its means”, Eskom would need to pursue further cost savings, as well as reprioritise some its business activities.
However, once the full implications of the third multiyear price determination period (MYPD3) were known, Gigaba would also begin sharing the possible policy implications with his colleagues in government.
He made specific reference to the ECS, which was already the subject of ongoing discussion with business and labour stakeholders. In fact, the ECS has been the subject of a protracted negotiation since the incidents of rotational load-shedding, which occurred in early 2008,
Should the scheme be implemented, Eskom would have a last-resort option to insist on mandatory savings from its largest business customers.
“Whilst the Nersa’s decision on Eskom’s third MYPD is welcome, the implications of the lower tariff and revenue approved for Eskom’s operations and overall business sustainability are currently being investigated.
“This decision is surely going to have far-reaching implications [and] is likely to include the curtailment of the supply-side, demand-side and energy efficiency measure currently in use,” he warned.
Since 2005, the utility has verified cumulative demand savings of 3 586 MW using a variety of incentive schemes for residential, industrial, mining, agricultural and commercial consumers.
During period from April 1, 2010, through to March 31, 2013, Eskom used resources allocated under the MYPD2 to accelerate its demand savings programmes, and was forecasting cumulative savings of about 1 272 MW for the period.
CEO Brian Dames, who had hitherto refrained for offering comprehensive commentary on Nersa’s decision, said the decision would affect a number of Eskom’s integrated demand-side management schemes.
He was also particularly concerned that there could be a loss of momentum around some of its energy-efficiency and demand-management programmes. “If we don’t do that, who will be doing that and who will ensure that we achieve those savings and run the demand-side programmes?”
In addition, there were concerns about the implications for future coal supply and prices and for certain capital projects.
Dames stressed that the Medupi, Kusile and Ingula projects were fully funded, but that the lower revenue allocation to capital programmes in the MYPD3 would affect the roll-out of transmission and distribution networks.
It would also influence its ability to plan beyond the current mega-project pipeline.