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SAIPPA PRESENTATION Regulatory Rules on Network Charges for 3 rd Party transportation of Energy. . Doug Kuni - 5 JULY 2011. Overview of points on Eskom Transmission Agreement and Nersa Consultation paper.

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slide1

SAIPPA PRESENTATION

Regulatory Rules on Network Charges for 3rd Party transportation of Energy.

Doug Kuni - 5 JULY 2011

slide2

Overview of points on Eskom Transmission Agreement and Nersa Consultation paper.

  • The Eskom Transmission and related Supplementary Reconciliation Agreements for generator and customer should work together to enable Independent users to use the system. They do not reflect what is needed , or customary, for independent use of system and as currently constructed, we doubt they that draft agreements on offer achieve this.
  • Paper states “Central Objective” of DUOS and TUOS Charges is promotion of efficiency in the use, operation and investment in the network so that costs are minimised in the long run. Unfocused objective, may be used by network owner/operator to justify a non reflective set of tariffs. To “whom” or “what” does the test of “efficiency “apply?
  • 1.4.2 objectives more correctly reflects what is needed: non-discriminatory access, cost reflectivity, non-discrimination and transparency
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Overview cont…..1/3

  • in 1.4.2 , “Revenue recovery of service providers” is also a concern – Why should this be different to cost reflectivity if the service provider is truly efficient? Existing users should not be expected to pay a premium to allow for system expansion as indicated here. System expansion should be covered by the costs recovered once the system is expanded.
  • the final 2 objectives of “Affordability” and “ Uniformity, simplicity, and predictability” suggest laudable intentions provided they do not imply cross subsidies and an inflexible tariff regime.
  • In 1.5 , need to understand better the nodal differentiated point tariff for entry TUOS charges to generators – there should be no discrimination in that charge being “averaged out” for Eskom generating plant.
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Overview cont…..2/3

  • In section 4.3 b) Nersa states that network owners will not be liable for the effects arising from the failure of their networks to deliver energy and that standard liability for direct damages will apply – implying that indirect and consequential losses will be excluded. The Draft Eskom Transmission Agreement differs: there is a clause providing that there is no commitment on Eskom to make its system available at any time for the generator, or any guarantee of its reliability or condition even if it chooses to allow the system to be available to the user. It states that the NTC is not liable for any losses. This is not in line with the usual use of a Transmission system and is unacceptable.
  • the requirement in 4.6 of Eskom being informed of Bilateral agreements between Consumer and Generator should not mean that all terms need to be disclosed – Eskom only needs limited information on anticipated output and demand.
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Overview…3/3

  • The advent of an ISMO would require contracts to be ceded in the future. It would be thus prudent to adopt structures for contracting and risk allocation which would facilitate a smooth transition.
  • The integrity of the regulatory environment is central to a functioning system: Policy and Regulations must work in concert to achieve desired outcomes. Where legal interpretations offer differing application, the outcome is confusion and uncertainty and IPP’s will encounter numerous obstacles.
  • We request Nersa to engage with IPP’s and Eskom to produce a suite of documents which can achieve the desired outcome – i.e Bankability of IPP projects.
  • End
  • Thank You.