January 17, 2018

South Africa’s energy regulator probing Eskom’s PPP delay

The National Energy Regulator’s electricity sub-committee has responded to a complaint issued by the South African Wind Energy Association (SAWEA), indicating that it has launched a formal investigation into Eskom’s conduct.  This follows a preliminary investigation, which found that there was sufficient grounds to warrant further action.

“We have had confirmation from NERSA that an expedited investigation into whether Eskom is in contravention of its licence, has now commenced. We await the timeline associated with this process, which could culminate with a ruling by a NERSA tribunal. Based on previous communications with NERSA it is likely that the process will be concluded within two weeks,” explained Brenda Martin, SAWEA CEO.

SAWEA declared a dispute during October 2016, requesting NERSA to undertake an investigation into Eskom’s continued unwillingness to honour the Department of Energy’s Power Purchase Agreements. In the event that Eskom is found to be guilty of failing to comply with its licence conditions, the Industry Association further requested that NERSA impose a penalty, being 10% of its’ annual turnover per day, commencing on the day of receipt of the notice of contravention. SAWEA has also confirmed that in subsequent communications with NERSA, the Association extended the complaint to include consideration of budget quote escalation effects.

“We’d like to reiterate that our primary intention is to achieve financial closure of Power Purchase Agreements. It remains our hope that Eskom will comply with the legal framework for power purchase, so that penalties do not need to be imposed on Eskom,” added Martin.

The South African Renewable Energy Council (SAREC) together with a number of individual Independent Power Producers have all subsequently joined the complaint as interested and affected parties.  The industry believes that Eskom, which supplies about 95% of the country’s electricity and holds a near monopoly on bulk electricity, is simply seeking to resist government’s commitment to energy security underpinned by an expanded supply mix.

Representing the thirty-seven independent power producers affected by the power purchase impasse, legal opinion was sought out by South African Renewable Energy Council, in January 2017. SAWEA is guided by legal opinion that is very clear: Eskom cannot sidestep binding determinations of the Minister. As single buyer, the monopoly utility must abide by the results of such determinations, which naturally include the signing of duly procured power purchase agreements.

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