Transcript NERSA PUBLIC HEARING : 22 JANUARY 2013

NERSA PUBLIC HEARING :
27 JANUARY 2016
NICOL JANSEN
VICE PRESIDENT : AGRI NORTHERN CAPE
Introduction
• Agriculture dependent on electricity, irrigation give
stability in food production – this is so clear in
current drought situation.
• Cold chain – indispensable in production of fruit,
vegetables, meat etc.
• Agriculture is responsible for the country's food
security – can’t take energy crisis lightly.
• Agriculture are not ignorant towards Eskom's
financial challenges.
• Agriculture must take their own financial wellbeing in
consideration – very important sector.
Reality
Agri Northern Cape realises the importance of
sufficient and continuous electricity supply –
• Expansion and development
• Sustained production
• Economic growth
Concern
•
Affordability is a concern.
WHAT HAPPENED TO ELECTRICITY
TARIFFS IN THE PAST?
Increased Calculation
Unit costs
% Increase
Year 1
2008/09
R 0.25
27.5%
Year 2
2009/10
R 0.32
31.3%
Year 1
2010/11
R 0.42
24.8%
Year 2
2011/12
R 0.52
25.8%
Year 3
2012/13
R 0.65
16.0%
Increase
New Tariff
R 0.07
R 0.32
R 0.10
MYPD2
R 0.10
R 0.42
R 0.13
R 0.65
R 0.10
R 0.76
R 0.52
CURRENT MYPD 3 APPLICATION
MYPD3
Jaar 1
R 0.76
Jaar 2
R 0.82
Jaar 3
R 0.88
Jaar 4
R 0.95
Jaar 5
R 1.11
Source : NERSA
2013/14
8.0%
R 0.06
2014/15
8.0%
R 0.07
2015/16
8.0%
R 0.07
2016/17
16.6%
R 0.16
2017/18
16.6%
R 0.18
R 0.82
R 0.88
R 0.95
R 1.11
R 1.30
SUMMARY :
PERCENTAGE CALCULATION
Percentage Calculation
Timespan
Years Cost per Cost after Total %
Unit
Average %
Increase Increase per Year
2008/9 -2012/13
5
R 0.25
R 0.76
203%
41%
2013/14-2017/18
5
R 0.76
R 1.30
71%
14%
2008/9 -2017/18
10
R 0.25
R 1.30
419%
42%
8
R 0.25
R 1.11
345%
43%
2008/9 -2016
Source: NERSA
The economy of the Northern Cape
•
•
•
•
Dependant on agriculture.
Large agricultural intensive irrigation area
The largest labour market – irrigation
The largest commodity in the intensive
irrigation area - grains
• Yellow maize and wheat - main crops.
01/02/2008
02/28/2008
04/30/2008
07/01/2008
08/27/2008
11/06/2008
01/09/2009
03/10/2009
05/13/2009
07/13/2009
09/09/2009
11/06/2009
01/07/2010
03/05/2010
05/11/2010
07/09/2010
09/07/2010
11/04/2010
01/04/2011
03/02/2011
05/05/2011
07/05/2011
09/01/2011
10/28/2011
12/29/2011
02/27/2012
05/03/2012
06/29/2012
08/28/2012
10/25/2012
12/24/2012
02/22/2013
04/25/2013
06/25/2013
08/22/2013
10/21/2013
12/18/2013
02/18/2014
04/17/2014
06/24/2014
08/20/2014
10/17/2014
12/15/2014
02/16/2015
04/16/2015
06/17/2015
08/14/2015
10/13/2015
12/09/2015
YELLOW MAIZE Feb. 2008 – Jan 2016
MIELIES '08 - '15
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Source : OVK
Yellow maize
•
•
•
•
Yellow Maize
An average increase of 80% from 2008 to Jan 2016,
8 years.
An average increase of 10% per year
Electricity
Electricity costs increased with 345 % in the same
period
An average of 43 % per year.
01/02/2008
02/27/2008
04/25/2008
06/25/2008
08/20/2008
10/29/2008
12/30/2008
02/26/2009
04/29/2009
06/29/2009
08/25/2009
10/21/2009
12/17/2009
02/15/2010
04/16/2010
06/17/2010
08/13/2010
10/11/2010
12/06/2010
02/02/2011
03/31/2011
06/02/2011
07/29/2011
09/26/2011
11/21/2011
01/20/2012
03/16/2012
05/18/2012
07/13/2012
09/10/2012
11/06/2012
01/07/2013
03/04/2013
05/03/2013
07/01/2013
08/27/2013
10/23/2013
12/19/2013
02/18/2014
04/16/2014
06/19/2014
08/14/2014
10/10/2014
12/05/2014
02/05/2015
04/02/2015
06/03/2015
07/30/2015
09/28/2015
11/23/2015
01/21/2016
WHEAT Feb. 2008 - Jan 2016
6000
5000
4000
3000
2000
1000
0
Source : OVK
Wheat
Wheat
• An average increase of 93 % from 2008 to Jan 2016, 8 Years
• An average increase of 12 % per year
Electricity
•
•
Electricity costs increased with 345 % in the same period
An average of 43 % per year.
Economic Realities
• Fluctuations in commodity prices due to international
price tendencies as well as weather influences like
draught.
• Through globalization, commodity prizes are formed
internationally.
• Local farmer must compete on the international market.
• Highly subsidized products of European countries make
us compete unequally.
• Agriculture are price takers - can't forward the increase of
inset costs to the consumer.
• Prices can move under the level of production costs.
• The effect hereof - agricultural sector can not service the
higher electricity costs.
• Pressure on food security in South Africa.
Conclusion
• Agricultural sector will be severely strained by ‘n further
8.6% increase. (16,6%)
• The pressure on economics of cash crops - lead to shift to
perennial crops like Pecan Nuts.
• This expands at a rate of 3 000 hectares per year in NK.
• Also lead to a decrease in permanent labour and the
production of grains.
• South Africa is already net importer of wheat and this year
maize as well.
• This is a matter of huge concern.
• Makes South Africa more dependant on imports for food
security
• Irrigation give sustainability to grain production, can't
afford to lose hectares to perennial crops, especially in
times of draught.
• Most unfavourable situation.
Recommendations
• Look the facts in the eye – take action
• Eskom's image and customers confidence
• Distinguish between network charges and
energy charges
• Legislation on renewable energy
• Government interference with municipality
financial management – pay Eskom bills
Facts to bear in mind
• Demand for electricity is mostly a function of it's price. Higher
price will lead to further revenue shortfall.
• Think creative of future energy supply and mix. Best for the
future.
• Are we still pumping funds into "protecting the well-known
past" – are we building creative to the future.
• Use open gas turbines that was supposed to be only for
emergency and short time use – fill on base load, what are their
condition now? Was it really the best decision, short term
approach with long term financial losses.
• Distinguish between wat is best for Eskom, what is best for the
country to take us into the future. Spend money on the future!
• Doesn’t mean we must liquidate Eskom – manage it into
bankruptcy.
Restructuring the national
Energy generation environment.
• Look at world trends – lessons learn by developed countries
- How does their energy mix look like?
• Take in consideration what the world bring to us by REN 21 at
the SAIREC conference.
• Don’t make the effort of Dept. Energy, by hosting the SAIREC
conference, and bring it for the first time in history to Africa,
undone by ignoring the proposals and see Eskom "as is" as the
only way forward.
.
NDP 2030
• Future of Energy generation - healthy mix between renewable
and fossil fuel working towards less dependent on fossil fuel
and more to renewable.
• This is an Department of Energy statement and goal.
• The Minister of Energy, Ms. Tina Joemat-Pettersson
accompanied President Jacob Zuma to the 2016 World Energy
Forum (WEF) in Davos, Switzerland from 20-23 January 2016.
• The Department of Energy indicated that the National
Development Plan provides the framework of our
developmental aspirations in the period up to 2050, including
defining the objectives for the energy sector. These objectives
include 1 energy security, 2 reduction in the cost of electricity, 3
reduction in emissions and water consumption, 4 increasing
access to modern energy carriers, 5 improving energy efficiency
and diversification of our primary energy sources.
Continue..
• South Africa has therefore planned for an energy mix
which includes coal, nuclear, gas, hydro and other
renewable energies like solar and wind.
Therefore
• Allow small scale renewable self generating energy.
• Let the private sector create generating capacity to the
grid.
• What goal are we trying to reach by keeping on
pumping money into Eskom, allowing business as
usual, open fire gas, delays at building programs,
overspend budgets, government's bad decisions,
political influences etc.
Eskom's image and customers confidence
• The Eskom customers have a lack of confidence in the
management of Eskom's finances.
1. Chairman Zola Tsotsi said: "With three years of solidly
improving results under its belt it would appear management
can look forward to a bonus."
2. “We have made a provision for payment of bonuses. They are
based on the performance of the business,”
3. Eskom has spend R7.2 million on six breakfasts for President
Zuma's close friends, the Gupta's family between November
2011 and 2012. ( City Press 20 Jan 2013)
4. Money that was mainly generated by tariff increases!
Continue..
5. From available figures, according to power consultant Pieter
van Dam, Energy Research Associates , the likely cost of
Medupi would be between R145bn (105 + 30 +10) and R155bn
(105 + 35 + 15) which was considerably higher than Eskom's
quoted R105bn.
6. In January 2007 Eskom said the planned 4500MW station
would cost R52bn [R11.6m/MW] (incl. IDC);
7. In comparison, the private hospital in Kimberley was build fairy
within budget and timeframe. (Private sector)
8. What is the financial status of other state owned company's
like SAA and Transnet?
• Speedup private initiatives in energy generation and
distribution!
Distinguish between network charges
and energy charges
Eskom Account – Landrate 1
Exorbitant FIXED Service & Network Charge (i.e. Line Fees)
Distinguish between network charges
and energy charges
• The loss off income for Eskom was not due to over expense on
distribution or network costs – no increase on network charge
can be allowed!
• There is already no incentive for small Eskom energy users, as
shown on example, to use energy efficient – Energy usage is
only 25% of total electricity bill.
• It will encourage users more to move to off grid self generation.
• This will make it more difficult for Eskom to maintain the rural
lines that also provide electricity to small towns and essential
users off electricity in rural areas.
Legislation on renewable energy
• “We can’t continue as if it is business as usual. Lack of energy is
a major constraint in Africa. We have to look at the renewableenergy value chain and focus on the interconnectivity of the
continent,” said Energy Minister Tina Joemat-Pettersson
• Incorporation of renewable energy on the national grid is a
National priority (World bank loans, SAIREC declarations, COP
15, Dept. Energy announcements etc.)
• Already said: Renewable energy and privatisation of energy
generation is a world wide tendency.
• IPP programs are well on the way, lack of eagerness to allow
small scale renewable energy connecting on the national grid.
• Allow small scale renewable as quick as possible – prevent
illegal connections as it starts to appear already – safety issues,
destabilise the grid
Continue…
• Speed up proses – from application till signing Banking and
Metering contracts were applicable, time is money.
• Reduce costs involved – allow self build programs, beware of
unnecessary regulations that are costly.
• More peak reductions will follow as private energy generating
capacity develops.
• To much red tape to get Metring and Banking contracts.
(Time delays, preferences to IPP's, RETEC, Reports by electric
engineers etc.)
Continue..
Rossgro Farming – 290 Kwp. solar system, Medium Voltage connection
R2.60
R0.85
Summer 1:2
Winter 1:6
R0.42
R0.37
• Compressed air, oxygen - nitrogen technology, battery
technology, private pump storage, channel irrigation
possibilities with surplus pressure.
• All are dependent on grid access – speed up proses.
Continue..
• Reduce the speed towards black down spiral for
Eskom – reduce the pace of tariff increases
• To high energy cost – more profitable for own
generation– more own generation means less income
for Eskom, less income trigger higher tariff – etc.
Can’t break this trend with regulations – allow the
economy to dictate – only long term sustainable
solution. Free market economy.
• Don’t be afraid for free market participation – access
to capital will dictate the pace.
• Otherwise – allow 10 Mw per district municipality on
first come first serve – monitor – smooth things out
and announce another 10 Mw.
Continue..
• Motivate participants for 10% more generating capacity than
average use.
• Each generation capacity build in private sector is capital not
spend by Eskom or government, contributing to building the
economy in SA. Asset for SA.
• Just manage it to the benefit of the broader economy. The
economy will create profit, profit is taxable, income for
government for spending on stimulating the economy and
social responsibilities.
Municipality debt - Eskom
1. Unacceptable high amounts owed tot Eskom
2. Better financial management drastically needed
3. Investigate private energy supply to munisipalities in
joined venture with Eskom included prepaid metering.
Agri NK Verdict
1.
2.
3.
4.
5.
6.
Concentrate on what is best for the country and
not what is best for the "as is" Eskom.
Look the facts in the eye – take action.
Eskom must work harder on it's image and
customers confidence in regards of financial
management.
Distinguish between network charges and energy
charges
Speed up legislation on renewable energy and
manage connection costs more efficient.
Better Municipality management – reduce Eskom
debt.
Thank You
Nicol Jansen
082 948 2629
[email protected]