1. NERSA PUBLIC HEARING : 27 JANUARY 2016
NICOL JANSEN
VICE PRESIDENT : AGRI NORTHERN CAPE

2. 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.

3. Reality Concern Agri Northern Cape realises the importance of
sufficient and continuous electricity supply –
Expansion and development
Sustained production
Economic growth
Concern
Affordability is a concern.

4. WHAT HAPPENED TO ELECTRICITY TARIFFS IN THE PAST?
Increased Calculation  
Unit costs
% Increase
Increase
New Tariff
Year 1
2008/09
R 0.25
27.5%
R 0.07
R 0.32
Year 2
2009/10
31.3%
R 0.10
R 0.42
2010/11
MYPD2
24.8%
R 0.52
2011/12
25.8%
R 0.13
R 0.65
Year 3
2012/13
16.0%
R 0.76

5. CURRENT MYPD 3 APPLICATION
Jaar 1
2013/14
R 0.76
8.0%
R 0.06
R 0.82
Jaar 2
2014/15
R 0.07
R 0.88
Jaar 3
2015/16
R 0.95
Jaar 4
2016/17
16.6%
R 0.16
R 1.11
Jaar 5
2017/18
R 0.18
R 1.30
Source : NERSA

6. SUMMARY : PERCENTAGE CALCULATION
Timespan
Years
Cost per
Cost after
Total %
Average %
Unit
Increase
per Year
2008/ /13 5
R 0.25
R 0.76
203%
41%
2013/ /18
R 1.30
71%
14%
2008/ /18 10
419%
42%
2008/ 8
R 1.11
345%
43%
Source: NERSA

7. 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.

8. YELLOW MAIZE Feb – Jan 2016
Source : OVK

9. 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.

10. WHEAT Feb Jan 2016
Source : OVK

11. Wheat Wheat Electricity
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.

12. 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.

13. 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.

14. 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

15. 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.

16. 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.

17. 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 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.

18. 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.

19. Eskom's image and customers confidence
The Eskom customers have a lack of confidence in the management of Eskom's finances.
Chairman Zola Tsotsi said: "With three years of solidly improving results under its belt it would appear management can look forward to a bonus."
“We have made a provision for payment of bonuses. They are based on the performance of the business,”
Eskom has spend R7.2 million on six breakfasts for President Zuma's close friends, the Gupta's family between November 2011 and ( City Press 20 Jan 2013)
Money that was mainly generated by tariff increases!

20. Continue..
From available figures, according to power consultant Pieter van Dam, Energy Research Associates , the likely cost of Medupi would be between R145bn ( ) and R155bn ( ) which was considerably higher than Eskom's quoted R105bn.
In January 2007 Eskom said the planned 4500MW station would cost R52bn [R11.6m/MW] (incl. IDC);
In comparison, the private hospital in Kimberley was build fairy within budget and timeframe. (Private sector)
What is the financial status of other state owned company's like SAA and Transnet?
Speedup private initiatives in energy generation and distribution!

21. Distinguish between network charges and energy charges

22. Eskom Account – Landrate 1
Exorbitant FIXED Service & Network Charge (i.e. Line Fees)

23. 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.

24. 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 renewable-energy 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

25. 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.)

26. Continue..
Rossgro Farming – 290 Kwp. solar system, Medium Voltage connection
Summer 1:2
Winter 1:6
R2.60
R0.85
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.

27. 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.

28. 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.

29. Municipality debt - Eskom
Unacceptable high amounts owed tot Eskom
Better financial management drastically needed
Investigate private energy supply to munisipalities in joined venture with Eskom included prepaid metering.

30. Agri NK Verdict
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.

31. Thank You
Nicol Jansen