Consumers should carry the costs of fuel hikes and coal-price fluctuations rather than Eskom, the power utility said on Wednesday.
Eskom CEO Jacob Maroga was arguing for regular electricity-price adjustments similar to those in the fuel sector.
”When we started with the current multi-year model of pricing, we did identify certain categories of costs that were very difficult to predict, even in a year, let alone a three-year period,” he said at a media briefing in Johannesburg.
Eskom had suggested to the National Energy Regulator of South Africa (Nersa) a system, used worldwide, of ”pass-through costs”.
There were certain costs Eskom could not forecast with such accuracy that it could manage them on its own, he said.
”So with those costs, you pass through those costs to the consumer.”
Giving as an example the effects of oil prices on the cost of petrol, Maroga said producers could not be expected to take either the risk of the fluctuations in oil prices or those of the currency exchange on their own.
”So there’s a formula that if the price of oil changes, the petrol price changes to reflect the pass-through costs. So they’re passing the risk of the oil cost to the consumer. And we want to do the same.”
At the moment, Eskom adjusted prices annually. Under a multi-year pricing system, it would do so every three years.
Eskom had indicated to Nersa it could not predict with a good measure of accuracy the prices of coal, particularly that bought on-the-spot.
”And we want to pass through those costs to the consumer,” said Maroga.
Eskom had seen that it was increasingly using short-term contracts — rather than those over 30 or 40 years — ”and that is where the volatility of prices happens”.
Another problem was transporting coal from the area where it was mined to a power station, which incurred transport costs, which also worked their way into the cost of coal.
All these factors were beginning to ”conspire to change our view of what the price is going to be in reality”, said Maroga.
Eskom also now had 1 000MW of power produced by plants using diesel, and with the power shortage found it was using these plants much more than originally planned.
”So we are exposing ourselves to the price of diesel, [which is] much higher than anticipated … We cannot fully take the risks of those costs.”
‘Deep emergency’
Maroga was speaking as the power utility began implementing large-scale ”pre-emptive” power cuts to cover shortfalls in the electricity supply.
”… We have a very deep emergency in the power situation in South Africa … I also have the confidence that we can deal with this emergency. We can deal with this emergency if we are together,” he said.
”The issue of load-shedding, scheduled or unscheduled, is an issue that we would prefer not to do. Our preferred route is to see voluntary savings.
”At senior level at Eskom, load-shedding does not sit well with all of us. It’s not an activity that we are comfortable in doing. It’s something that people stress about, worry about — the impact, for instance, on critical installations, hospitals and so forth …”
He said the more electricity the public was able to save, the faster Eskom would be able to increase its coal stockpiles.
”As much as we would have wanted to see more progress in the increase of our stockpiles, there are a number of things that have happened — particularly the weather — that have impacted on our coal-store base.”
Maroga said Eskom had on average 12 days’ coal stockpiled at its power stations at the start of the week.
While none of them were below five days’ stock, six had five-to-10 days’ supply, four had between 10-and-20 days’ and two had above a 20-day supply.
”We still have an aspiration that by winter we’ll have most of our stations, if not all, above 20, so that we go into winter with a very safe position on coal.”
Maroga said contracts had been secured for 39-million more tons of coal to meet Eskom’s 45-million-ton target in the next two years.
”We are in negotiations with mines around deliveries in quanta and qualities.
”That is a very important aspect with a view to how plants perform. We have seen a correlation between coal qualities and plant performance.
”And we are seeing that if we continue with the current qualities, long-term plant health is going to be compromised.
”And so we are taking a view that we are going to have to improve the quality of the product being put through our plants … That may mean we may have to up our appetites of price …” — Sapa