South Africa: Diesel costs spikes Eskom tariffs – Nersa

Eskom customer service center in Rivona.

Eskom customer service center in Rivona.

06 June 2015 – The billions of rands that Eskom is spending on diesel to drive its open cycle gas turbines is the reason for its recent tariff increase applications, a conference heard on Thursday.

Eskom based its multi-year price determination (MYPD3) for the 5 years from 2013/14 to 2017/18, on the assumption that its base load would provide 82% capacity, National Energy Regulator of SA (Nersa) executive manager for electricity regulation Mbulelo Ncetezo told the civil society conference on the country’s electricity crisis.

This capacity had however subsequently been reduced to 74%, partly due to the backlog in maintenance.

To bridge the gap, open-cycle gas turbines (OCGT), which ran on diesel, were used, which cost about R3/KWh to run, compared to 17c/kWh for electricity generated from coal.

The utility was currently applying to Nersa to reopen the first leg of the MYPD3, asking for a 25% tariff hike, to get customers to pay for the diesel. The public had until June 15 to comment.

For the whole five years for MYPD3, Eskom had applied for R12.5bn to buy diesel, of which R2.5bn was for the current financial year. It had however already used R10.5bn, Ncetezo explained.

Member of Cabinet’s “war room” looking at the electricity crisis, Malcolm Simpson, told the conference on Wednesday that Eskom needed to replace the diesel to power its OCGT with gas. This needed co-operation from Transnet, to import the gas and store it, as well as the Central Energy Fund and PetroSA.

Project manager at Green Cape, Mike Mulcahy, said peak demand for electricity had decreased over the years.

“There’s a lower peak demand for electricity than there was in 2007. So with the same electricity infrastructure, we should be able to meet our demand quite easily,” Mulcahy said.

This was due to people using less electricity due to price increases, using alternate energy like solar power, and lower economic growth in the country.

However, as Eskom needed to maintain a certain level of revenue, with falling sales, it had to hike prices.

“We are in the middle of an electricity crisis, and it looks like it will get worse over the next five years,” said Mulcahy.
*Thomas Hartleb –

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