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The National Energy Regulator of South Africa (Nersa) wants to
force Eskom to shift the risks around coal costs from consumers on to either
itself or the mines themselves.
In practice, it is planning to partially regulate the price of coal
in the South African market where Eskom is a dominate coal consumer.
Nersa this week proposed an array of changes to the system used to
set Eskom’s allowable income through tariffs, the so-called Multi Year
Determination (MYPD).
The system through which this figure actually gets converted into
tariff hikes will, however, get changed separately and Nersa promised to also
publish a new proposal on that in May.
For two years in a row now, Eskom has lodged enormous “regulatory
clearance account” claims.
These are based on how much less money Eskom made compared to what
had been predicted in the MYPD because of low sales or higher-than-expected
costs.
The most far-reaching changes are to how Eskom gets to pass coal
costs through to the tariffs.
“It became obvious during the Regulatory Clearing Account (RCA)
process that the rules around primary energy were inadequate for the current
situation,” reads the proposal, which is now open for public comment.
The problem is a “changing supply regime” at the electricity
monopoly where the old system of “tied” mines next to power stations gets
replaced with new supplies from further afield, often from a myriad of small new
companies, said Nersa.
The proposal is to make Eskom supply the cost of coal from each
individual supplier at each individual power station instead of the largely
meaningless average figures currently used.
Nersa also wants to impose benchmark prices for all types of coal
contracts.
The regulator also wants to seriously constrain Eskom’s ability to
buy emergency coal at market prices.
Other changes include a stronger ban on using the exorbitant diesel
generators unless it really is a last resort and not being able to pass through
any unexpected costs from independent power producers.
The basis for forecasting power sales will also be changed because
this has led to major RCA claims from Eskom.
In future, Eskom will have to bear the cost of its forecast being
wrong by more than 5%, proposes Nersa.
