State-owned power utility Eskom and Public Enterprises Minister Lynne Brown confirmed on Wednesday that contracts under the so-called short-term power purchase programme (STPPP) had been renewed ahead of the March 31, 2015, expiry date.

Eskom told Engineering News Online separately that the renewal followed the National Energy Regulator of South Africa’s (Nersa’s) recent approval of the agreements.

In a statement, Brown said the STPPP contracts would supply “at least 827 MW to the system”, while it was understood that Nersa approved Eskom’s contracting of more than 1 350 MW during 2015/16.

Brown added that the renewal had been facilitated by Deputy President Cyril Ramaphosa, with support from Energy Minister Tina Joemat-Pettersson, and that government regarded the contracts as “essential” amid the country’s tight electricity supply.

Neither the contract prices nor the identities of the generators were disclosed, but they were believed to be mainly industrial and agroprocessing companies that either generated or cogenerated electricity as part of their production processes.

Ahead of the announcement, concerns had been raised about whether Eskom’s liquidity problems might prevent it from renewing the contracts. But, in confirming the renewals, Eskom did not indicate how these liquidity constraints had been overcome. It is understood, though, that Nersa’s approval would enable the utility to apply to recover the costs through a future tariff increase.

Eskom confirmed recently that it intended pursuing a “selective reopener” of the third multiyear price determination, most probably covering the remaining three years of the five-year control period, which began on April 1, 2013, and which would continue until March 31, 2018.

Reports suggested that the utility could seek a hike of 25.3% from as early as July 1 this year. However, Eskom refused to comment on either the size or timing of its application, stating only that it was still consulting the National Treasury and the South African Local Government Association regarding the matter.

NEW CHAIR

In her statement confirming the STPPP renewals, Brown also stated that Eskom was “unequivocally” on “solid ground” and that government was committed to delivering on its mandate of providing a reliable electricity service for the country.

She confirmed receipt of Zola Tsotsi’s letter of resignation as board chairperson and nonexecutive director, and signalled her support for the board’s appointment of Dr Ben Ngubane as interim chairperson, from March 31.

She made no reference to the status of the four executive directors, including CEO Tshediso Matona, who were suspended on March 11 in order for the board, then led by Tsotsi, to conduct an unfettered inquiry into the status of the utility.

Brown said that, over the next few weeks, she would undertake a consultative process to appoint a permanent chairperson and would communicate progress on the matter in due course.

“It is my firm view that the board and the shareholder continue to act in the best interest of the company and the people of South Africa to preserve the value and integrity of the company,” she said, highlighting that, as shareholder representative, she would be guided by the provisions of Eskom’s legal framework, which included the Companies Act and its Memorandum of Incorporation.