Power purchaser to be carved out of Eskom
Systems operator could be stand-alone entity within a year
October 22, 2009
By SAMANTHA ENSLIN-PAYNE
The systems operator that is responsible for procuring power from independent power producers (IPPs) will be operating as a stand-alone entity within a year, making the procurement of private power more efficient.
Ompi Aphane, the acting deputy director-general of electricity, nuclear and clean energy at the Department of Energy, said yesterday that a process was under way with the National Energy Regulator of SA to ring-fence the systems operator, which is currently housed within Eskom.
An interim arrangement could be in place within three months, but establishing this entity as the independent systems operator and as a stand-alone organisation required legislation and that could take a year to finalise, he said.
Bobby Godsell, the chairman of Eskom, said this week in an opinion article published in a daily newspaper that the provision of power from independent producers could grow far more rapidly if the cumbersome regulatory process in licensing IPPs was changed.
The process required Eskom to interrogate producers about their proposals and cost structures.
Doug Kuni, the managing director of the South African Independent Power Producers Association, agreed that the regulations were cumbersome.
Currently IPPs make applications to the systems operator based within Eskom, which Aphane said was a conflict as Eskom was a generator of power and was buying power from competing producers.
This would be changed by setting up the independent systems operator. "We don't know if Eskom can build and operate power stations as efficiently as IPPs, so we want competition," Aphane said.
But Kuni said it was not clear how the independent systems operator would procure power and who would underwrite these purchases.
"Eskom has a balance sheet, the Independent systems Operator does not," Kuni said.
Another obstacle to expanding the role of IPPs was that Eskom would not sign long-term power purchase agreements with IPPs until it was in a better financial position.
Aphane said some of these contracts would require Eskom to sign purchase agreements for 15 years to 30 years and it would be a breach of the Companies Act if it did so without knowing whether it could afford it.
Godsell said a national average tariff that blends all sources of generation should be determined by the regulator.
When Eskom buys power from IPPs at higher than the national average of 33c a kilowatt-hour (kWh), Eskom is effectively subsidising the power produced by IPPs.
But Kuni said you could not compare the cost of generating power from a new power station with that of an old power station, such as those operated by Eskom. The 33c a kWh was based largely on depreciated assets, he said.
The real test will be a comparison between what it costs Medupi (Eskom's new power station) to produce power and what it will cost an IPP.
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