A wind turbine at Darling Wind Farm in the Western Cape. Eskom is hedging the signing of IPP agreements. Photo: Supplied
Johannesburg - Eskom says it is in talks with the National Treasury, Department of Public Energy and Department of Energy to discuss the power purchase agreements it is supposed to sign with independent power producers (IPPs).

The renewable energy industry has accused Eskom of refusing to sign power purchase agreements with 37 IPPs, putting investments of approximately R58 billion at risk.

To the irritation of the renewable energy industry, Eskom has maintained it will sign power purchase agreements with independent producers at a pace and scale it can afford.

Eskom has delayed signing the 37 power purchase agreements, heightening uncertainty about the fate of the Renewable Energy Independent Power Producer Procurement programme which, until recently, has been hailed as a model for public-private partnerships.

At issue, according to Eskom spokesperson Khulu Phasiwe, was how Eskom would recoup the costs of buying the renewable energy. “President [Jacob Zuma] has said that we must sign the IPPs. There is no debate about that. But Eskom needs clarity on certain aspects,” said Phasiwe on Thursday.

In his State of the Nation Address earlier this year, Zuma unequivocally said Eskom would sign the power purchase agreements, a move that was expected to put the matter to rest.

Phasiwe said there was a need to clarify how the costs of the IPPs would be accommodated in the Regulatory Clearing Account (RCA) mechanism. The RCA is a mechanism that compares certain uncontrollable costs and revenues assumed in Nersa's (National Energy Regulator of South Africa) Multi-Year Price Determination (MYPD) to actual costs and revenues incurred by Eskom.

Nersa uses the MYPD methodology to evaluate Eskom’s applications for tariff increases and to determine Eskom’s revenue requirements.

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In August, the North Gauteng High Court set aside a decision by Nersa regarding Eskom’s (RCA) application for the 2013/14 financial year, the first year of the Third Multi-Year Price Determination (MYPD3) period.

Nersa has appealed against the High Court judgment.

The High Court case has jeopardised Eskom’s ability to retrospectively claw back costs for the 2014/15 and 2015/16 financial years.

Eskom has previously indicated that the submissions would amount to approximately R19 billion and R22 billion respectively.

In its RCA application for the 2013/14 financial year, Eskom said IPPs had pushed up its primary energy costs by R580 million.

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