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South Africa: Eskom Demands Back-Payments
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Cape Argus (Cape Town)
23 March 2008
Posted to the web 24 March 2008
Boyd Webb and Chiara Carter
Eskom not only wants the country to pay two-thirds more for its electricity from April 1 but is demanding that consumers be forced to make back-payments if it does not get permission for the tariff increase immediately.
This would mean cash-strapped consumers having to cough up close to 70 percent extra for electricity later this year.
Eskom has argued in a confidential submission to the National Energy Regulator of South Africa (Nersa) that tariffs will have to soar to cover the rising costs of coal and of additional fuel.
Though the government is sympathetic to Eskom's concerns, the utility's plans this week were met with fury by political parties, trade unions, consumer organisations, smaller businesses and ordinary South Africans.
Thembani Dukula, an executive member of Nersa, said at the weekend that the regulator had been taken aback by Eskom's request and by the support it was getting for it from the government.
Only five months ago, Eskom, which had been awarded a modest 6,2 percent increase, asked that this be raised to 18,7 percent. It was awarded 14,2 percent. Dukula said this increase was to be used by Eskom to fund R340-billion of capital expenditure.
The parastatal's request this week for a further 53 percent increase was largely to cover increasing coal and fuel costs. Dukula said Eskom's new request was additional to the 14 percent increase and not instead of it.
Eskom has demanded that the increase take effect on April 1 - even though the regulator still has to assess the validity of the utility's arguments for it.
If the increase is not approved until later in the year, Eskom wants payments from consumers backdated to April 1.
Dukula said the likelihood of the regulator being able to pronounce on Eskom's demands in the next week was "slim".
"It's more likely to take six months."
The regulator has refused to make Eskom's 72-page submission public because, it says, it contains confidential information. But Dukula said Eskom's argument for so large an increase was based on the huge rise in primary energy costs, such as the price of coal, which has increased dramatically throughout the world.
Eskom, desperate for coal after allowing its reserves to run low, was having to pay top prices for coal that would otherwise go to other customers. Earlier this year Eskom announced that it would require an extra 45 million tons of coal for its stockpiles for the next two years and this rush for supplies has forced coal prices still higher.
Large coal suppliers, such as Exarro, have told Eskom that they would increase their deliveries but the utility wants to build up a large stockpile as a bulwark against future coal-supply crises.
The regulator intends to investigate whether Eskom's coal-supply contracts are prudent and viable. There has been speculation that some of its contracts with small, "emerging" suppliers are neither prudent nor viable.
And there are expenditures now required for which Eskom has not budgeted.
Dukula said that, according to Eskom, open-cycle gas turbines, which had been intended to supplement generating capacity at times of peak demand, were using far more fuel than envisaged because they were being operated for longer than originally intended.
"Those things are designed to operate for 5 percent of the time but in most instances they have been operating at about 50 percent of load factor, said Dukula.
"These turbines have used a lot of fuel, more than they [Eskom] expected."
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In its submission to the regulator, Eskom argues that the electricity crunch that has led to the country being gripped by power outages has forced it to find R2,5-billion to cover expenditures such as subsidising the installation and purchase of products that are more energy-efficient, such as solar water heaters.
Dukula said the regulator was not about to rubber stamp Eskom's proposals for a tariff increase.
Eskom's planned price increase comes at a time people are furious about power-cuts, outraged at the size of the pay and bonuses of Eskom's top brass and angry that the utility failed to plan ahead and allowed its coal stocks to dwindle to a dangerously low level.
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