Mediation in Frankfort, Eskom dispute ‘futile’, says Nersa

Energy regulator Nersa has washed its hands of the much-publicised dispute between Rural Maintenance, the company that manages electricity distribution on behalf of the Mafube Local Municipality in the Free State, and Eskom.

This is a lost opportunity to give clarity to the electricity supply industry about what the “normal load profile” is that forms the base for determining how much load must be shed when the Eskom system operator implements load shedding.

This, according to Chris Yelland, managing director of EE Business Intelligence, is crucial for decision-making about new generation capacity.

Chris Bosch, CEO of Rural Maintenance, says Nersa’s position is based on factual errors and untested allegations and the regulator did not respond to two pertinent questions the company put to it.

The Mafube municipality includes the towns of Frankfort, Tweeling and Villiers.

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Eskom stopped Rural Maintenance earlier this year from eliminating load shedding in Frankfort during the day by using energy sourced from new solar farms in the area, a practice it calls “voiding”.

The crux of the dispute is the meaning of the term “normal load profile”.

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Eskom, for example, calls for a 5% reduction in the “normal load profile” when it announces load shedding.

The term is not defined in the current load shedding rules as contained in NRS 048-9 as issued by the National Rationalised Specifications (NRS) Association of South Africa.

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In, or out?

If, as Eskom contends, the energy sourced from the solar farm forms part of the normal load profile, it is included in the base against which the 5% is calculated and load shedding must be implemented.

If not, the solar energy can be used to keep the lights on during the day.

Rural argues it cannot be included in the base, because it is new and because it is weather-dependent.

The company went to court, but lost an urgent application on a technical point, due to a lack of support by the municipality.

Nersa meets with Eskom and Rural

It then approached Nersa and asked two questions before formally asking for mediation in the dispute:

• Is it within Nersa’s mandate to interpret NRS 048-9; and
• Does Nersa require the municipality’s support for Rural to refer a dispute to Nersa for mediation?

According to Bosch, Nersa met with Rural Maintenance once. Nersa confirmed the meeting.

It then met separately with Eskom and representatives of the Mafube municipality.

The regulator did not revert to Rural Maintenance thereafter to verify any allegations made against Rural.

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Disdain: Mediation deemed ‘futile’

In a letter to Rural, Eskom and the municipality – dated 25 July but received by Rural Maintenance on 16 August – Nersa “unfortunately and to our client’s grave disappointment did not provide any meaningful and comprehensible response to our client’s two questions,” according to a letter sent by Rural’s attorneys to Nersa on 18 August.

Nersa in its letter to the parties states rather that mediation is “futile” due to several reasons.

In response, Rural’s attorney’s letter reads:

“Instead of addressing our client’s pertinent questions, being of great importance to our client’s desire to alleviate the significant negative effects of daily load shedding and provide electricity (during sunlight hours) to the community of Frankfort, including schools, hospitals, businesses, water and sewerage (critical loads), Nersa makes numerous factual incorrect and inaccurate statements, which statements appear to underlie Nersa’s unfortunate and regrettable approach to our client.”

The company then tears into the reasons Nersa considers mediation futile …

Nersa has no record of having approved the agency agreement between Rural and Mafube in accordance with Section 21(1) of the Electricity Regulation Act (ERA).

Rural says this is an incorrect reading of Section 21(1), which states:

It further states that Nersa has been aware of the contract for the past decade and renewed Mafube’s distribution licence in 2016:

“Illustrating not only Nersa’s lack of knowledge into the affairs of the municipality but the ill-conceived reliance on s.21(1) of the ERA.”

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The lack of support by the municipality leaves the concern by the court unresolved.

Rural acknowledges the position of the municipality, but adds the municipal manager Advocate Mothusi Lepheane has not given a rationale or justifiable explanation for his resistance to Rural’s efforts to eliminate the hardship of load shedding for the residents of Frankfort.

Nersa, by requiring the municipality’s support, is a further obstacle for the community of Mafube, according to Rural.

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he solar photovoltaic (PV) plant is not registered with Nersa.

This, according to the attorney’s letter, leaves Rural with “a sense of incredulity and anger”.

This because the signatory to the registration documents that were included in Rural’s initial submission to Nersa, is the very same person under whose signature it is now denied, namely Nersa CEO Advocate Nomalanga Sithole.

“Our client questions whether Advocate Nomalanga Sithole even read the correspondence prior to appending her signature thereto. Perhaps had she done so, she would have noticed this factual incorrect statement.”

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The system operator requirements have not been met and the PV plant’s compliance with the grid code “is in question”.

Rural rejects this and says it has not been given any detail or explanation in this regard.

The solar generation is already included in the normal load profile and cannot be offset against load shedding.

Rural says Nersa has prejudged the matter it intended to refer for mediation and points out that this is new generation that has not been included and, being weather-dependent, it would be reckless to do so.

‘Bald, unsubstantiated’ and harmful

Rural bemoans Nersa’s “bald and unsubstantiated statements in writing” without offering the company an opportunity to provide proof to the contrary.

This, according to Rural, is “just another response from a government institution that appears to be politically motivated”.

Rural says it is not interested in politics and will not take the matter any further.

Yelland says he is speechless at the inadequacy of Nersa’s response to Rural Maintenance.

“It is critical to resolve the substance of the dispute and investment decisions depend on the outcome,” he says.

“The impact of leaving it unresolved has an impact on the economy, the electricity supply industry and the development of further generation projects.”

Community left burdened

The attorney on behalf of Rural concludes: 

“The community of Frankfort is now, at the hands of Nersa and the municipality, burdened with load shedding that could have been avoided and/or reduced due to the introduction of the new generation capacity at the load centre and our client’s ‘voiding’ program.”

In the meantime, the Mafube Business Forum supports Rural Maintenance wholeheartedly.

Hans Pretorius, a founding member, says Rural Maintenance, with its excellent service, is putting the ANC-controlled council to shame.

In addition, its presence blocks the utilisation of electricity revenue due to Eskom for bulk purchases from being used for other purposes and does not allow for corruption in the electricity function.

“Rural’s excellent service has brought about a political conversion in Mafube, and the ANC cannot stand it,” he says.

Read Moneyweb’s full coverage of the case here.

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This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.