Ina Opperman
Business Journalist
3 minute read
8 Nov 2021
6:31 pm

SA needs more time to comment on electricity supply costs

Ina Opperman

South Africans do not only battle with energy supply, but also how much it costs and should therefore have their say about how the costs are calculated.

Salga complains that municipalities lose out by not being able to apply levies and surcharges on sales of electricity by Eskom to its own customers. Picture: iStock

South Africa needs more time to comment on electricity supply costs proposed by the National Energy Regulator (Nersa), as well as greater transparency on electricity supply costs. More expert comment will also ensure that these rules are fair, appropriate and encourage economic growth.

Nersa published a Consultation Paper to Determine a New Price Determination Methodology on 30 September, giving stakeholders only 22 days to comment on revising the existing Multi-Year Price Determination (MYPD) methodology used to set the electricity prices.

At the same time, Nersa rejected Eskom’s pricing application for 2022/23, saying this application must be made under the as-yet-to-be-finalised new methodology although Eskom submitted the price application four months before the Nersa publication. Eskom is now challenging Nersa’s rejection in court.

ASLSO READ: Nersa’s plan would see households pay much more, says Eskom

Do not rush with electricity supply costs

Public watchdog Outa has now warned Nersa not to rush these crucial pricing rules.

“South Africa needs a better method of setting electricity prices, but this needs a more thoughtful and longer public consultation process,” Wayne Duvenage, CEO of Outa, says.

Outa made a formal submission to Nersa on the pricing review, saying it is pleased that the regulator has acknowledged that change is needed regarding the methodologies behind our country’s determination of electricity prices.

However, Outa warned that a hasty approach for the mere sake of consulting the public will simply not cut it. There is no silver bullet to solve our electricity issues.

“The methodologies are very complex and must not simply look good on paper. If Nersa gets this crucial approach wrong, the economic consequences will be felt across all spheres of society from industries to homes.”

Outa wants a more precise public consultation process, as well as greater transparency regarding the issues and costs of electricity with technical input from energy experts and industry stakeholders.

“Nersa may be the national regulator, but it cannot take on this mammoth task on its own. We recommend that the consultation process be slowed down to allow for meaningful public participation.”

According to Duvenage, Outa believes that industry stakeholders, experts and civil society should assist Nersa to reach a revised methodology and a national solution to the electricity price.

ALSO READ: No time to change price method, Eskom says in court bid against Nersa

Outa’s submission about electricity supply costs

Outa’s submission includes concerns about:

  • Transparency regarding the cost of electricity supply.
  • The cost implications of Eskom’s unbundling into three divisions because it will undoubtedly affect electricity prices.
  • Clarity on current hidden costs, such as the future costs of disposing of nuclear waste, decommissioning nuclear power stations and the cost of Koeberg’s apparently unlawful refurbishment.
  • The cost of reducing emissions that should be considered in pricing, as this would ensure that all current social burdens are included in the cost of supply.
  • Transparency on municipal wheeling tariffs and how these will affect customers.
  • Transparency on municipal cross-subsidies.
  • Unaffordable prices penalising and further marginalised the poor.
  • The adaptability of the pricing methodology to future energy developments, such as increased use of Independent Power Producers (IPPs).
  • The implementation of Nersa’s Guidelines for Prudency Assessment, produced in 2018, in the meantime until a new methodology is finalised that could protect consumers against the worst excesses of the clawback system in the current pricing methodology.

ALSO READ: Why Nersa wants an overhaul of Eskom tariffs

Put customer needs first

“Civil society has seen the fallout of state capture and an energy policy that is stuck, as well as unfounded investment in fossil fuel, with little regard to the changing international environment. An alternative system would have to put the customers’ needs first, rather than balance reasonable profits versus electricity service.

“Electricity is supposed to be a driver or enabler for economic development and not a means of extracting profits from a captive audience. The restructuring and unbundling of Eskom and the setting up of the Independent System and Market Operator (ISMO) would hopefully assist with this,” Duvenage says.