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Nersa says its chair does not ‘benefit’ from higher electricity tariffs

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The National Energy Regulator of South Africa (Nersa) felt it necessary to respond to a social media post claiming its chair, Thembani Bukula, holds interests in private companies that would benefit greatly if he uses his position at Nersa to push through increases in the price of electricity.

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Shared thousands of times, the post reads: “Wait for it. Thembani Bukula, the Chairperson of Nersa is also the CEO of PowerX South Africa, first private energy trading company. He is also the non-executive director of Mahube Infrastructure, which has 5 independent power producers contracts (2 wind farm and 3 solar farms).

“Who benefits the most when Nersa increases tariffs by 32% over next 2 years? It is such a massive conflict of interest that the Nersa decision to grant Eskom tariff increase must be declared unlawful and immediately be withdrawn by Nersa.

“Cabinet ministers must be grilled for allowing Thembani Bukula appointment as chairperson of Nersa without doing any background checks for conflict of interest.”

Misleading

Nersa says in its response that the comments are incorrect and misleading, and there is no conflict of interest.

“He resigned from his position as non-executive director of Mahube Infrastructure upon his appointment as Nersa chairperson. The law requires that upon appointment every part-time regulator member (board member) must disclose to the Minister of Mineral Resources and Energy his (or her) pecuniary interest in any company (firm or association) engaged in the electricity, piped-gas and petroleum pipelines industries.

“Mr Bukula, as part-time regulator member, has duly complied in this regard and did declare his interests before taking over his position,” it said.

Mahube Infrastructure is listed on the JSE, and issued a Sens announcement on 14 September 2022 stating that Bukula had resigned as a director.

“Mr T Bukula advised the board that, following his appointment as chairperson of the National Energy Regulator of South Africa, he would not make himself available for re-election to the board at the AGM in terms of the company’s memorandum of incorporation and will consequently retire as independent non-executive director and member of the audit and risk committee of the company, with effect from 21 October 2022,” is said.

Nersa says in its statement that Bukula does not stand to benefit from any decisions taken by the regulator, and that he is not solely responsible for determining electricity prices.

“The energy regulator board consists of nine members that make decisions on applications from Nersa licensees, including Eskom. The decisions of the regulator are solely based on the thorough analysis of the application, as well as facts and evidence presented to the energy regulator.”

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Bukula confirmed this personally to Moneyweb.

“The determination of the electricity price is based on the Electricity Regulation Act and the MYPD [multi-year price determination] methodology,” he says.

“The decisions of Nersa are [made] by the nine members of Nersa, not one person. I am the chairperson of Nersa and I communicate the decisions of Nersa.”

The multi-year price determination methodology is based on the rate of return and incentive-based principles, through the introduction of the transmission and distribution service incentive schemes and the energy efficiency demand side management schemes, according to information supplied by Nersa.

PowerX

Bukula is still CEO of PowerX which describes itself as SA’s first licensed energy trading company.

It buys electricity from renewable energy sources and mostly sells it to customers that specifically need this type of power to earn greenie points.

Bukula says PowerX does not benefit from electricity price increases.

“The ‘Use of Systems’ [or wheeling fees] that PowerX pays will increase at whatever rate Eskom will determine, thus reducing PowerX’s profitability,” he says.

Listen/Read: Eskom generation business needs private investment – PowerX CEO [Feb 2019]

Bukula says PowerX can buy from any licensed and registered power producer and sell directly to a customer – if the power plant is connected directly to the customer.

If the power plant is not connected directly to the customer, the company needs to get approval from the network owner/operator to use its system at approved rates.

Can PowerX shield a company from load shedding?

“Yes,” says Bukula, “if the customer’s point of connection can be discriminated from other customers, which is not always possible.”

PowerX advertises that it is a platform for independent electricity producers (IPPs) to sell their power. “We purchase electricity from a range of power producers – spanning all renewable energy generation technologies – and sell to a broad base of consumers in the industrial and commercial sectors.

“Power procured derives from [IPPs] across the country and we tailor the Power Purchase Agreements (PPAs) to suit each project. These PPAs are anchored by the agreements we sign with municipalities which allow us to use their distribution system to wheel power over their network,” according to PowerX.

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It adds that its platform assists municipalities in their drive to achieve a greener environment and power independence.

“We help develop the relevant municipalities’ renewable energy landscape to enable the independent supply of renewable energy to their respective large economic contributors and small to medium businesses alike,” it says.

Recent press releases indicate that PowerX mostly conducts business with Nelson Mandela Bay Municipality and assists the municipality in achieving successful trade of green power.

“PowerX is an aggregator of clean energy and sources power from different green technologies from all over SA and imports it into Gqeberha,” it says.

“PowerX also sources power from internal generators which include a large wind power producer, as well as over 40 micro-scale photovoltaic solar facilities.

“These facilities contributed to over R150 million in capital investments into the local municipality. This also ensured other future revenues, cost savings and new permanent jobs in the Bay area.”

PowerX will be facilitating the expansion of generation facilities within the borders of the municipality by a further 25 megawatts (MW), which will increase the capital investment to R650 million.

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