Liquidation of Eskom’s RCA balance to be phased in

In addresses to stakeholders in Kimberley and Bloemfontein regarding its applications for the liquidation of its outstanding regulatory clearing account (RCA) applications recently, Eskom’s general manager for regulation, Hasha Tlhotlhalemaje, said that the power utility is aware of and accepts that the RCA balance of R66-billion will be phased in over a number of years and will not be liquidated as a once-off payment.

Open cycle gas turbine

According to Tlhotlhalemaje, the regulator should take the utility’s financial situation into account for its sustainability as well as the impact on consumers.

Eskom’s applications relate to the 2014-15; 2015-16 and 2016-17 financial years. The RCA is a backward-looking and globally-accepted reconciliation mechanism which balances the difference between what was awarded by the National Energy Regulator (NERSA) on the basis of a forecast through the multi-year price determination (MYPD), and the power utility’s actual costs, based on its audited financial statements.

Tlhotlhalemaje said that the utility was not asking for anything more than what was already determined by NERSA. In essence, the risk on RCA items was temporarily carried by Eskom during the MYPD 3 period. The consumers benefited from a lower price of electricity for the period than it would have had, if the outcomes had been known in advance.

In defense of Eskom’s increased usage of expensive-to-run open-cycle gas turbines (OCGTs) during the years of the RCA applications, Tlhotlhalemaje said that the decline in plant availability from 2013, resulted from delays in the decision to build new generating capacity; the deteriorating plant performance of Eskom’s existing plant; and inadequate or delayed plant maintenance. The utility maintained that it use its OCGTs to ensure system security and minimise load shedding.

Tlhotlhalemaje said the utility had had to run many of its power stations flat-out to avoid load shedding and ultimately a black-out of the South African power system.

Eskom recognises, Tlhotlhalemaje said, that the new-build programme It is recognised that the Eskom build programme was very ambitious with regards to time. Many challenges, including time for design, strikes, availability of skills with a zero-risk, resulted in the power utility being unable to deliver within the planned time-scales.

To support the power station units which were running flat-out, additional coal was required. This meant coal being sourced from existing long-term contracts as well as short- and medium-term contracts to fill the gap. Plant maintenance was prioritised, Tlhotlhalemaje said, to ensure capacity would be available when needed.

Thava Govender, Eskom’s group executive for generation, said that independent power producer (IPP) contracts were approved by NERSA to enable the generation gap to be filled. He said that every available megawatt was secured to allow the demand and supply to be managed, especially in the 2014/15 and 2015/16 periods.

Govender said that it was thus prudent for the power utility to use its OCGTs beyond their normal peaking function, during the 2015 and 2016 financial years, to improve the supply/demand balance during the period of plant shortage. This provided space for maintenance and limited the far more expensive shedding of load, he said. Improved plant performance from late 2015 contributed to reduced OCGT usage in 2016/17, he said.

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