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Eskom agreeable that the liquidation of RCA balance be phased in
Friday, 04 May 2018: Eskom on Thursday and Friday addressed stakeholders in Kimberley in the Northern Cape and Bloemfontein in the Free State respectively on its three outstanding regulatory clearing account (RCA) applications to the National Energy Regulator of South Africa (NERSA). The applications are for the 2014-15; 2015-16 and 20116-17 financial years, totalling over R66 billion.
 
The RCA is a balancing mechanism between what was awarded by NERSA on the basis of a forecast through the multi-year price determination (MYPD), and what actually materialised (Eskom’s audited financial statements). The RCA is thus a backward-looking and globally-accepted reconciliation mechanism, and not in response to the 5.23% tariff increase that was granted to Eskom by NERSA for the 2018/19 financial year. Eskom has been guided by NERSA’s rules and regulations in making these applications. The RCA is a risk management process of the MYPD methodology. It goes back to the NERSA decision – Eskom is not requesting anything further 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 consumer was allowed a lower price of electricity for the time period than it would have had, if the outcomes had been known in advance. 
 
“Since the application is for three years, Eskom is aware that the RCA balance of R66bn will not be liquidated as a once-off and we are agreeable for it to be phased over a number of years. However, the phasing of the liquidation of the RCAs needs to take Eskom’s financial sustainability and impact on customers into consideration,” said Ms Hasha Tlhotlhalemaje, Eskom’s General Manager for Regulation, doing Eskom’s presentation during the NERSA public hearings in both provinces.
 
In Bloemfontein, Eskom delved deeper into the causes of insufficient generating capacity on the national grid that contributed to the increased usage of the expensive open-cycle gas turbines (OCGTs) during the years of the RCA applications. These included: the delay in the decision to build new capacity; the deteriorating plant performance of Eskom’s existing ageing plant; and inadequate or delayed plant maintenance. The decline in plant availability (energy availability factor or EAF) from 2013 is what contributed to the constrained system which required increased OCGT usage for system security and to minimise load shedding.
 
Eskom clarified that it had to run many of its power stations flat-out (in the red) to be in a position to avoid load shedding and eventually a black-out of the power system in South Africa. It is recognised that the Eskom build programme, once the Government made a decision to allow Eskom to undertake the programme, was very ambitious with regards to time. “Many challenges including time for design, strikes, availability of skills with a zero risk resulted in it not being able to deliver as was assumed. To support the power station units that were running flat-out it required additional coal to be sourced. This encompassed coal from existing long-term contracts as well as short- and medium-term contracts to fill the gap. The prioritisation of maintenance was also required to enable capacity to be available when needed to avoid load shedding. Independent power producer (IPP) contracts were approved by NERSA to enable the gap to be filled,” said Mr Thava Govender, Eskom’s Group Executive for Generation. He clarified that every available megawatt was secured to allow the demand and supply to be managed. This was particularly applicable for the 2014/15 and 2015/16 years. 
 
Govender said that it was thus prudent that the OCGTs were, as was expected when they were commissioned, utilised beyond their normal peaking function, during the 2015 and 2016 financial years, “to improve the supply / demand balance during the period of plant shortage” as NERSA said in December 2007. “This contributed to creating space for maintenance and limiting the far more expensive load shedding, once all other demand and supply side options had been fully utilised. The improved plant performance from late 2015 was one of the contributing factors to the reduced OCGT usage in 2016/17,” Govender concluded.
 
 
ENDS