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  • Writer's pictureRFS

LPU and Business Tariff Increase Consultation Notes

Date: 22 May 2024

Time: 11h00

Venue: RFS Boardroom, Frankfort


Attendees (as per attendance register - Annex 1)

  • Six Star

  • VKB

  • Correctional Services 

  • Mafube Frankfort Provincial Hospital

  • OK

  • Spar

  • RFS


Agenda

  • Gugu Presentation (Annex 2)

  • This year, NERSA has not published a guideline for municipal tariff increases. NERSA compelled all electricity distributors to submit full cost of supply studies. RFS therefore has no idea what NERSA deems important nor what the weightings are that will be used by NERSA in setting the tariffs for July 2024.

  • The tariffs published by RFS are simply its own proposed tariffs and it remains to be seen what NERSA’s response will be. 


Customer Questions


QUESTION: Spar

Can clients on the municipal network procure solar energy from the solar farms directly at a cheaper rate than the promulgated rate?


ANSWER: RFS

No, electricity distributed across the municipal public network is regulated by the Electricity Regulation Act and approved Nersa tariffs. Tariffs are regulated and only approved tariffs can be applied.


QUESTION: OK

What does the Mafube community benefit from the solar and load curtailment programs? With the tariff increase of 10% and the load curtailment subscription fee of 10% on the energy component, it seems like businesses are experiencing an increase in cost regardless which makes their business expenses unfeasible.


ANSWER: RFS

RFS is procuring surplus energy from various community-owned sun farms for cheaper than what we are paying Eskom. This reduces the cost of supply and also filters down into reduced tariffs. RFS has already applied to NERSA for lower tariffs pertaining to 10 of the last 12 years.


South Africa is facing a severe shortage of electricity caused by its ageing generation capacity which has led to a deterioration in economic activity. The real threat to local businesses in Mafube is the non-continuity of electricity that forces businesses to halt production or subsidise production through expensive own electricity generation/storage. For Mafube to grow economically, we need an energy supply answer available to everyone.


The RFS voluntary load curtailment program: is an immediate relief program that enables the community to source its own electricity generation/storage from shared community assets that, through economies of scale, are cheaper in orders of magnitude than for each electricity user to do their own thing. The benefit is that supplementary backup energy is made more affordable and thus more accessible to a wider portion of the community to promote increased economic activity which should lead to increased production, manufacturing and trading.


The RFS Solar program: is a long-term relief program that reduces the communities' dependence on Eskom and aims at buffering the retail tariffs from the exponentially increasing Eskom tariffs.


QUESTION: VKB

It is clear to VKB that RFS has a +60% Margin on Revenue. Is this market related and is this necessary for operating a sustainable business?


ANSWER: RFS

VKB’s calculation of the gross margin is not accurate. VKB is only considering selective tariff components and not the entire cost of bulk energy received. The market-related gross margin is between 25%-32%. RFS has invested in infrastructure and systems to mitigate against the negative effects of loadshedding and so endeavours to protect its revenue without having ever increased tariffs above NERSA’s normal annual tariff increases approved for the industry.


FOLLOW UP QUESTION: VKB

We would like to make our own assessment of the RFS Business model. Will RFS be willing to share all cost of supply source documentation, Eskom accounts and associated information?


ANSWER: RFS

No. RFS makes such information available to the Regulator so tasked for the purpose. RFS will however provide any reasonable information at its discretion. As the cost of RFS’s “cost of supply” is in the public domain, RFS will provide such actual audited cost of supply information to VKB.


QUESTION: Six Star

RFS has the most expensive tariffs in the country, RFS has made empty promises (a reference to the hydroelectric power plant that was being investigated) and RFS has charged Mr Victor exorbitant rates for the electricity consumption at his residential house being R12,000 for a normal residential household.


ANSWER PART 1: RFS

RFS accessed the consumption-related data from its systems and confirmed to Mr Victor that he has in fact used 5,519kWh’s at a cost of R12,355 (inclusive of VAT), providing for an average residential cost of R2.23/kWh (inclusive of VAT) when the total cost is simply divided by the energy actually consumed. In addition, RFS has demonstrated applying for lower tariff increases than what was awarded by Nersa in 10 out of the 12 years of its operation so far. This has led to Mafube retaining a status of lower-than-average tariffs across all the end user categories when compared to other sustainable municipalities (of which most are not sustainable and in financial distress). See the residential tariffs as a comparison so distributed to all in the meeting:


































Attached below are further comparisons for business and large power user tariffs.




































ANSWER PART 2: RFS

The Hydroelectric project so investigated in the Wilgeriver had been discarded as not possible because the municipality has control over the strategic site and is not willing to make the property available on reasonable terms for a project of this magnitude. To clarify - the hydroelectric project was not the only program RFS had committed to to promote energy security, reduce energy cost and support local economic activity. Other projects that had in fact proceeded can be listed as follows:


Self-loadshedding program

This program was successfully commissioned in Feb of 2023.

The program aimed at taking control of the bulk supply points loadshedding so as to maintain continuity of supply to the loadshedding exempt loads and better tailor load reduction requirements from the grid operator of the end users by providing customised loadshedding and load curtailment options. The program required significant upgrades in the network operating software control systems as well as field monitoring and control equipment and human and technical resources which was funded without incurring any additional costs to the end user.


Self-managed load curtailment program

This program has been successfully commissioned in May 2023.

This program aimed at accommodating Large Power Users who were capable of synchronising and managing their own dispatchable power to do so in compliance with the load curtailment program offered by Eskom. The program required significant upgrades in the network operating software and human and technical resources which was funded without incurring any additional costs to the end user.


RFS managed load curtailment program

This program has been successfully commissioned in October 2023.

This program aimed at assisting smaller power users who were not able to afford dispatchable energy and network synchronisation technologies without a scale of economy to still take advantage of the standardised load curtailment program so offered by Eskom.


SSEG program

This program has been successfully commissioned in July 2017.

This program aimed at promoting small-scale embedded generation by end users to reduce the overall community dependence on Eskom-supplied electricity. The program not only enabled small power users to supplement their own consumption from their own renewable generation assets but also enabled large power users to capitalise on an opportunity to supply their excess energy to assist in the reduction of loadshedding to customers unable to afford load curtailment even through the subsidised RFS programs.


Agricultural village development

This program is in the municipal approval stage for site development.

This program is aimed at providing a dedicated zone with privatised utility services such as clean and consistent electricity, water and heat at more affordable rates than otherwise available in municipal authorities.


High-value crop farming program

This program is in the inception phase.

This program is aimed at promoting high-value crop farming through hydroponics and other high-density practices to expand the value chain of the local agricultural community, promote skilled sustainable jobs and support local economic activity.


 

Attachments


Annex 1 RFS LPU and Business Tariff Increase Consultation Notes 2024 05
.pdf
Download PDF • 233KB

Annex 2 RFS LPU and Business Tariff Increase Consultation Presentation 2024 05
.pdf
Download PDF • 622KB


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