Sparks to fly over Eskom

Eskom’s chosen course could bring to a sudden halt government’s successful procurement of renewable energy from independent power producers (IPPs). Twenty-six preferred bidders have been announced, representing capacity of 2 205MW and investment of almost R50 billion.

Eskom wants exemption from the obligation to issue budget quotes to preferred bidders beyond round three of the renewable IPP programme. These quotes are for the cost of infrastructure needed to connect to the grid. The infrastructure cost is borne by the IPP, but the quote is a requirement to initiate a power purchase agreement, which obligates Eskom to buy power from these IPPs for 20 years.

Eskom has suspended the issuing of budget quotes until 2018, apparently in an effort to avoid this obligation. In its application for the exemption it says it first needs a revenue guarantee from Nersa. Nersa’s electricity sub-committee rejected Eskom’s decision during its meeting on Tuesday. This is expected to be confirmed by the regulator during its meeting at the end of the month.

Nersa chairperson Jacob Modise equated the Eskom application with blackmail. Modise said Eskom had to comply with its licence conditions, including the requirement that it issues budget quotes within the prescribed timeline. He said the government could not allow all this renewable development and then permit this decision by Eskom.

Nersa member Thembani Bukula said the guarantee request was a backlash from Eskom after it “requested something it didn’t get”, an apparent reference to Eskom’s failed bid earlier this year for a “selective re-opener” of Multi Year Price Determination (MYPD) 3 and the lower than expected award in its earlier first RCA application relating to MYPD2.