earthlife africa jhb mypd2 submission
DESCRIPTION
Earthlife Africa JHB MYPD2 Submission. Table of Contents 1. Kusile & Equity 2. Eskom Costs 3. Eskom Generation 4. Eskom Revenue 5. Free Basic Electricity. Earthlife Africa JHB MYPD2 Submission. - PowerPoint PPT PresentationTRANSCRIPT
Earthlife Africa JHB MYPD2 Submission
Table of Contents
1. Kusile & Equity
2. Eskom Costs
3. Eskom Generation
4. Eskom Revenue
5. Free Basic Electricity
Earthlife Africa JHB MYPD2 Submission
Recommendation 1: Funding for Kusile should not be in the MYPD2 period as cheaper forms of CAPEX currently exists.
Recommendation 2: Private equity in the public electricity sector should not be considered a source of funding as it is contrary to the public good.
Earthlife Africa JHB MYPD2 Submission
““...equity is the most ...equity is the most expensive form of funding, expensive form of funding, which will have an adverse which will have an adverse impact on tariffs in the long impact on tariffs in the long
run.”run.”--Eskom
Earthlife Africa JHB MYPD2 Submission
Costs
• Eskom's costs may be set too low
• Oil & coal projections may be too low
• No indication of a plan to reduce risk
to liquid fuel volatility
• Externalised costs ignored
• Continued reliance of fossil fuels
Earthlife Africa JHB MYPD2 Submission
Recommendation #3: NERSA examines Eskom's vulnerability to oil prices and its possibly erroneous assumptions of predicted oil pricing. Eskom cannot be allowed to claim costs for OCGT if it does not take reasonable steps to mitigate (i.e. alternative sources of peak power, hedging, future contracts, etc.) volatility and increases above and beyond assumed.
Recommendation #4: Energy efficiency is cheaper than OCGT (either used as peaking or supplementary base load) and this should be given priority over OCGT.
Earthlife Africa JHB MYPD2 Submission
Earthlife Africa JHB MYPD2 Submission
Recommendation #5: NERSA to examine water and coal issues at Medupi before granting tariff increases. A rigorous examination would be well within the ambit of the Regulator.
Recommendation #6: NERSA examines Eskom's coal figures in light of long-term trends.
Recommendation #7: NERSA includes the externalised costs of not complying with the Air Quality Act 2004 into the costs of coal-fired generation, as mandated by the White Paper.
Earthlife Africa JHB MYPD2 Submission
""An increase in export prices will An increase in export prices will also result in capital allocation also result in capital allocation
towards the export market which towards the export market which will further delay the opening up will further delay the opening up
of new coal mines for Eskom of new coal mines for Eskom supply."supply."--Eskom
Earthlife Africa JHB MYPD2 Submission
Recommendation #8: NERSA to mandate that R&D costs should be spent on renewable energy, energy efficiency and smart grid technology.
Recommendation #9: NERSA to make public the details of Eskom's R&D costs.
Recommendation #10: NERSA to recognise that Eskom can internalise externalised costs and that, having done it in terms of road maintenance, that it continues this practise in other cost categories.
Earthlife Africa JHB MYPD2 Submission
Recommendation #11: NERSA to ensure that Eskom, for the MYPD2 period, maximise imports into South Africa as an alternative to new generation, as this would smooth out CAPEX and reduce the need for high annual increases.
Recommendation #12: In conjunction with tariff reform, NERSA must examine the financial viability of Eskom's balance of payments with regards to import and export prices.
Earthlife Africa JHB MYPD2 Submission
Recommendation #13: Given that high carbon emissions represent a major risk (not only to Eskom but to South Africa as a whole), NERSA should require Eskom to formulate a urgent mitigation strategy and not grant revenue that is contrary to mitigation measures.
Given the low probability of CCS being available soon enough to mitigate carbon emissions, Eskom has no choice but to expand its generation mix and stop building coal-fired power stations. The only practical and cost-effective manner is to invest heavily in renewable technologies and energy efficiency.
Earthlife Africa JHB MYPD2 Submission
"One of the plants we are "One of the plants we are building is CCS ready, building is CCS ready,
although to be quite frank no although to be quite frank no one really knows what that is one really knows what that is
at the moment."at the moment."--Steve Lennon, Eskom
Earthlife Africa JHB MYPD2 Submission
Generation
• Serious cost overruns
• CAPEX R84bn to R385bn in 3 years!
• Medupi R60bn to R120bn!
• Kusile R85bn to R111bn!
• DSM limited despite being cheapest
option.
Earthlife Africa JHB MYPD2 Submission
Recommendation #14: On the basis of financial sustainability, prudence and cost-effectiveness, NERSA should not base any tariff increases on any form of nuclear CAPEX.
Earthlife Africa JHB MYPD2 Submission
Recommendation #15: NERSA to reform tariff system so that energy efficiency is attractive for Eskom.
Recommendation #16: Industrial tariffs (especially for SPAs and International End Users) to rise significantly in order for energy efficiency measures to become economically attractive.
Recommendation #17: The Regulator examines the PCP in order to prevent it become a liberalised energy market, thus under-cutting the power and purpose of NERSA.
Earthlife Africa JHB MYPD2 Submission
"The capital cost of the DSM "The capital cost of the DSM programme...is significantly programme...is significantly lower than any supply-side lower than any supply-side
option."option."--Eskom
Earthlife Africa JHB MYPD2 Submission
Revenue
• Tariff system is broken
• 2009 losses include R9.541bn on
aluminium and foreign currency linked
embedded derivatives
• Eskom selling below cost of
production
Earthlife Africa JHB MYPD2 Submission
Recommendation #18: Eskom abolishes its current practice of selling below the average cost of production; i.e. NERSA should use Eskom's average cost of production as the minimum tariff for all customers (including SPAs and Export), excluding Free Basic Electricity.
Recommendation #19: NERSA to publish the entire contracts of industrial users, SPAs and export arrangements.
Category
Redistributers 769.00 0.01763% 88,345.00 41.12% 20,579,000,000.00 38.36% 0.2329 0.2763 -0.0434 -3,830,723,500.00
Residential 4,223,708.00 96.85167% 10,392.00 4.84% 5,552,000,000.00 10.35% 0.5343 0.2763 0.2580 2,680,690,400.00
Commercial 47,603.00 1.09156% 8,642.00 4.02% 2,732,000,000.00 5.09% 0.3161 0.2763 0.0398 344,215,400.00
Industrial 2,935.00 0.06730% 54,815.00 25.51% 11,887,000,000.00 22.16% 0.2169 0.2763 -0.0594 -3,258,384,500.00
Mining 1,144.00 0.02623% 32,177.00 14.98% 7,439,000,000.00 13.87% 0.2312 0.2763 -0.0451 -1,451,505,100.00
Agriculture 84,329.00 1.93370% 4,913.00 2.29% 2,249,000,000.00 4.19% 0.4578 0.2763 0.1815 891,538,100.00
Traction 509.00 0.01167% 2,918.00 1.36% 869,000,000.00 1.62% 0.2978 0.2763 0.0215 62,756,600.00
7.00 0.00016% 3,525.00 1.64% 978,000,000.00 1.82% 0.2774 0.2763 0.0011 4,042,500.00
3.00 0.00007% 9,123.00 4.25% 1,356,000,000.00 2.53% 0.1486 0.2763 -0.1277 -1,164,684,900.00
Number of Customers
Percentage of Total
Customers
Consumption in 2009
(GWh)
% of Total Consumpti
onEskom Revenue
2009
% Revenue
from electricity
sales
Eskom Revenue 2009 R per kWh
Eskom Average
Total Cost per Unit Sold (R/kWh)
Differential between Revenue and Total
Cost
Profit/Loss (Revenue/Average
Cost per Unit), Rands
International Utilities
International End Users
Eskom Average Costs vs. Revenue 2009. (Derived from pg. 228 of Eskom's 2009 Annual Report)
Earthlife Africa JHB MYPD2 Submission
““The year-end valuation of these The year-end valuation of these contracts – embedded derivatives contracts – embedded derivatives – resulted in an accounting loss of – resulted in an accounting loss of R9,5-billion. They are clearly not R9,5-billion. They are clearly not
sustainable."sustainable."--Bobby Godsell, ex-Eskom
Earthlife Africa JHB MYPD2 Submission
““they are problematic not only in they are problematic not only in price, but also because they price, but also because they
impose an accounting uncertainty impose an accounting uncertainty on Eskom that makes proper on Eskom that makes proper strategic management of its strategic management of its resources very difficult.."resources very difficult.."
--Bobby Godsell, ex-Eskom
Earthlife Africa JHB MYPD2 Submission
Recommendation #20: Taxes from Eskom to be reinvested into Eskom's renewable build, energy efficiency and/or FBE.
Recommendation #21: That the level of debt be raised through Government loans.
Recommendation #22: NERSA to set Eskom's rate of return to 0%.
Earthlife Africa JHB MYPD2 Submission
Free Basic Electricity
• Vital for poverty eradication
• Earthlife is in the process of finalising
research and will share with NERSA
• Eskom's proposals are inadequate
and shameful
Earthlife Africa JHB MYPD2 Submission
Recommendation #23: A minimum of 200kWh per month of FBE.
Recommendation #24: The best option is a national step-block tariff with a free allocation and without means testing and limited connections (i.e. 60amp instead of 20amp).
Earthlife Africa JHB MYPD2 Submission
Recommendation #25: No tariff increases should be granted without a meaningful FBE that will realistically protect the majority of the population from tariff increases.
Recommendation #26: Pre-paid metres must be optional and not forced on to poor households.
Earthlife Africa JHB MYPD2 Submission
Conclusion
• NERSA cannot grant increase as too
much is wrong with Eskom's
submission
• Tariff reform, RE CAPEX, and FBE
are all required