1. Generator tariffs and charges overview
April 2014

2. Presentation Outline Introduction Distribution use of system charges
Transmission use of system charges
Proposed Genflex tariff
Treatment of energy reconciliation/charges
Wheeling
Offset
Energy add-back
Banking of energy
Quotations for generators

3. Introduction The Electricity Pricing Policy states that:
“Pricing structures for generators usually consist of a combination of capacity, energy and ancillary services charges. These charges may be TOU differentiated to encourage availability and production during certain periods. Tariff structures should not impede on the least cost dispatch of the different generating sets and supply options.”
The Electricity Regulations on New Generation Capacity document (May 2011) provides a framework for the procurement of new generation capacity
Wheeling is not covered
The pricing of connection and access to the networks is also not covered
In March 2012, NERSA published the Regulatory Rules on network charges for third party transportation of energy

4. Introduction
These Regulatory rules outline the rules in terms of the treatment of the following charges for generators:
network charges
losses
reliability services charges
connection charges
service and administration charges
subsidy contributions

5. Use-of-Systems (UOS) Charges

6. What are use-of-system charges?
Use-of-system charges are tariff structures and rates that recover the costs associated with making capacity available on an electricity network.
Use-of systems charges recover:
Capital (rate base/shared infrastructure)
Operation and maintenance costs
The transmission and distribution losses
Cost of ancillary services
These UoS charges do not recover connection charges
Recovered separately
Use of system charges will be applicable to generators and loads.

7. Distribution use-of-system charges

8. UoS charges for generators – network charge
Demand charge based on the maximum export capacity
The charges only to be raised to HV connected generators
i.e. generators connected at voltages (>66 kV).
MV connected generators (11 and 22 kV) will not pay network charges
It is not feasible to use the current tariff charges for loads, as they contain low- voltage cross-subsidies.
Cost reflective network charges are substantially higher for MV connected generators.
This would, in effect, create barriers to entry to generators located at these voltages thus defeating the objective of creating access to the grid and sharing the burden of supplying for electricity needs between Licensees and non- licensee generation.
Will be applicable for a limited time period.

9. UoS charges for generators – losses (negative)
Distribution losses
Dx connected generators are assumed (initially at least) to reduce Dx losses
The benefit of losses is assumed to be the inverse of the cost of losses for loads i.e. not new loss factors for generators are used.
The standard tariff published loss factors are used as the basis as a negative charge.
Generators will therefore receive network charge “rebate”.
This rebate is calculated at the energy cost on a time-of-use basis at the loss factors as published and applied in the standard tariffs.
Depending on how much is generated, then there may not be any charges raised for the generator.
Take onto account impact on Distribution losses.
Rebate = energy produced in peak, standard and off-peak periods
x wholesale energy rate in peak, standard and off-peak periods
x (Distribution loss factor x Transmission loss factor-1)

10. Example of rebate calculation

11. UoS charges (Costs for Ancillary Services)
Transmission provides reliability services to ensure the short-term reliability of supply to customers. The System Operator buys ancillary services to achieve this.
Ancillary services are the services, functions and activities that are essential for the stable and efficient operation of the power system. They include voltage support, reserves, etc.
The cost of reliability services is recovered on a volumetric basis (c/kWh).
For load customers, the proposal is to unbundle this charge from the energy charges.
For generators, the charge will also be raised.

12. Comparison of use-of-system charges payable – loads and generators

13. Transmission use-of-system charges
Overview

14. Transmission use-of-system (generators)
Transmission Use of System Charges: are charges for the provision of access to the transmission network to transfer energy. They comprise of three parts:
(a) Network Charges: for the use of the transmission system infrastructure for the transportation of electricity. Use of the network occurs by users importing from the system for their consumption (Demand TUoS) and by users exporting to the system for sale (Generation TUoS).
(b) Reliability Services Charges: for the recovery of the costs arising from the operation and security of the transmission system.
(c) Loss Factors: for the recovery of costs associated with energy losses.

15. Transmission use-of-system (generators)
Tariff Code:
Objectives:
Cost-reflectivity, Optimal asset utilisation, Predictability, Non-Discriminatory Open Access, Reflect the cost structure
Pricing methodology:
Locational varying charges for generators: Load flow studies and Marginal Loss Factor methodologies for network and losses cost recovery respectively.
Geographically differentiated charges for loads based on four concentric pricing areas: 0- 3% price differential per zone
Cost recovery:
Costs recovered equally (on a 50/50 basis), from generator and load customers.

16. Transmission use-of-system (generators)
TUoS Network Charge
TUoS charges for generators aggregated into six zones (Cape, Karoo, KZN, Mpumalanga, Vaal, Waterburg)
Zones derived from the tariff code principles: PTDFs, MLFs, load and generators centres
Zones reviewed every five years (Recommended)

17. Transmission use-of-system (generators)
Network Charges
Location varying charges
Fixed charge based on the maximum export capacity.
Related to the cost of providing the network infrastructure
Distribution Factor Methodology (DFM) : Network cost allocation
Based on DC load flow simulations (Tariff code)
Use of (incremental) power transfer distribution factor (PTDF)
PTDF: is the relative change in power flow on a particular line due to a change in injection and corresponding withdrawal at a pair of busses.
voltage sensitivities are used along with the sensitivities of line flows with respect to voltage to calculate the PTDFs.
PTDFs depend on the topology of the electric power system. That is, PTDFs change when a change of the topology occurs.

18. Transmission use-of-system (generators)
Transmission Losses
Power flow is converted to heat in transmission facilities
Losses = I2R
Losses increase with line length and current; also increases with reduction in voltage
Power losses significantly affected by the dispatch, transfer and pricing of power.
Inaccurate pricing of transmission losses may result in a significant distortion of the true cost of transmission of power.
Losses cost allocation (Methodology)
Marginal cost pricing, based on the marginal loss factors
Locational varying loss factors
Negative loss factors for the Cape and Karoo zones
The marginal loss factor at a bus is the percentage increase in system losses caused by a small increase in power injection or withdrawal at the bus

19. Transmission use-of-system (generators)
Reliability services charge
Recover the cost of ancillary services from generators and load customers
Ancillary Services
Necessary to support the transmission of electric energy between purchasing and selling entities while maintaining reliable operation
Generally involves using generating capacity not otherwise providing energy for end use but
Can involve load reductions in place of increased generation output (demand resources)
Energy Generation + Transmission Service = Delivered Electricity
Ancillary services currently in use by Eskom: Reserves; Regulation and Load Following; Energy Imbalance (Constrained Generation); Reactive Power Supply and Voltage Control from Generation Sources; Black Start and Islanding Capability.

20. Transmission use-of-system (generators)
PRICNG ZONES FOR GENERATORS:
Zero network charge for the Cape and Karoo zones
Loss factor for allocation of losses to generators
Negative losses for Cape and Karoo
Reliability services charges raised from all Transmission connected generators.
Service and administration charges raised from Transmission connected generators.

21. Proposed Genflex tariff
Subject to NERSA approval

22. Why the Genflex tariff?
In view of the proposed introduction of use of system charges for generators, a tariff category is required to accommodate scenarios where there is both consumption and generation of energy at the same point of supply (metering point).
Where a generator requires energy for auxiliary usage when not generating, or a customer that is a co-generator produces more energy than is consumed (at times) and exports the excess energy onto the grid, there is a case for a new tariff category.
The same network assets are used for the purposes of generating (transporting energy into the grid) and for consumption (importing energy from the grid).
There is currently no tariff category dealing with charges for customers that are both generators and consumers of energy from the same point of supply.
There is also a need to review the NMD Rules to accommodate Maximum Export Capacity rules.
A separate submission to be made to the Regulator.
17 September 2018

23. Customer configuration
Same assets are used for the consumption and generation
The proposal is to consider the use of system charges for consumption and generation at same point of supply
This ensures that there is no double charging
Energy consumption (Load)
NMD
customer meter
Eskom Network
Energy generation (Generator)
MEC
NMD – relates to the contracted demand for consumption
MEC- relates to contracted demand for generation

24. Criteria for allocation of customers to the Genflex tariff
There must be consumption and generation at same point of supply (metering point)
The customer must be synchronised with the Eskom grid (no generators/ consumers connected behind the Municipality network to be considered)
Where there is synchronisation, CUOSA must be in place (applicable MEC)
The customer must be on an LPU tariff
The customer must have the appropriate metering i.e. 4 quadrant metering
Currently LPU customers have this metering

25. Tariff charges
Tariff
All existing Customers consuming and generating energy at the same point of supply will be required to convert to Genflex tariff.
The tariff will have an urban and rural version namely:
Genflex (urban)- This tariff will have the same rates as Megaflex and will include the generator use of system charges.
Genflex (rural)- This tariff will have the same rates as Ruraflex and will include the generator use of system charges.
17 September 2018

26. Tariff charges Energy charges on electricity consumed
The Customer will pay for all energy consumed at the relevant “Genflex” energy rates.
Where the customer generates for own use or for wheeling purposes, the Customer has the choice of the energy either being treated as above or the energy can be offset (refer to the Reconciliation of energy policy).
Service and administration charges
A service charge will be payable on the account level and an administration charge will be payable on each transaction/service agreement loaded.
17 September 2018

27. Tariff charges Contribution to subsidies Network Charge
The ERS will be payable on all energy consumed
Affordability subsidy payable on all Eskom energy sales for urban customers
Urban Low voltage subsidy also still applicable
Network Charge
The use-of-system charges payable will depend on whether the Customer is predominantly a load or a generator
In each month the customer shall pay the greater of:
The sum of the Genflex network charges for loads, or
the sum of the Genflex network charges for generators
Network charge applicable to generator ≥66kV
Subject to NMD (MEC) rules application
Reliability service charges
The Genflex reliability charge will be raised on the greater of the imported or exported energy
Reactive energy charge
The Genflex reactive energy will be charged on all reactive energy supplied by Eskom at point of connection on energy consumed
17 September 2018

28. Proposed charges payable where consumption and generation of energy occurs at the same point of supply – Transmission connected and Distribution HV generators (>66kV)
Consumption
Generation
+ Energy charges-
energy generated to be recorded
for purpose of calculating reliability
service charge and losses
+ Energy charges
+ Network charges
+ Network charges
Greater of
+ Excess network charges
(MEC excess charges)
+ Excess network charges
(NMD penalties)
Review in NMD rules
+ /- Losses
+ Losses
Sum of
+ Reliability services
Sum of
+ Reliability services
+ NERSA approved subsidy
+ Service and admin charges
+ admin charges

29. Proposed charges payable where consumption and generation of energy occurs at the same point of supply –MV generators (<66kV)
Consumption
Generation
+ Energy charges
+ Energy charges-
energy generated to be recorded
for purpose of calculating reliability
service charge and losses
+ Network charges
No Network charges applicable
Review in NMD rules
+ Excess network charges
(MEC excess charges)
+ Excess network charges
(NMD penalties)
+ /- Losses
+ Losses
Sum of
+ Reliability services
+ Reliability services
Sum of
+ NERSA approved subsidy
+ Service and admin charges
+ admin charges

30. NMD rule changes
Proposed NMD rule updates will also be submitted to NERSA to include the treatment of Maximum Export Capacity (MEC) for generators.
17 September 2018

31. Contracting
A hybrid agreement with incorporates the ESA and Connection and use of system agreement will be available for Genflex customers.
17 September 2018

32. Wheeling of energy

33. Introduction
Wheeling of energy occurs when a non-utility owned generator sells the energy it produces directly to a third party buyer/consumer and not to the utility.  
For various reasons, it has become attractive for consumers to want to procure energy from private generators.
In cases where the generator is not located on the same site as the consumer, this would require the wheeling of energy between the generator and the buyer/consumer of the energy.

34. What is wheeling of energy?
Wheeling providing access between a non-Eskom Generator and a third party to facilitate the trading of energy

35. Does Eskom allow wheeling?
Eskom allows wheeling based on the principle of non-discriminatory access to the grid, subject to the buyer being a large power user and : 
The generator having a licence from NERSA to generate and for the wheeling transaction.
The generator must comply with Eskom’s requirements for the grid connection and have signed a connection and use-of-system agreement..
Either the buyer or the seller must be an Eskom customer.
Where one of the parties are located within a municipal network, the municipality would have to agree to allow the wheeling transaction.

36. Illustration of wheeling of energy
Eskom
900 kWh generated
Customer consumption
1000 kWh
NEG/Seller
100 kWh
Meter 1
Meter 2
Eskom & NEG energy
Physical flow
Contractual flow
Generator contracts directly with Eskom customer.
Customer purchases remainder from Eskom.
All energy wheeled across Eskom network.
Energy not owned by Eskom to be credited on customer’s bill.
Credited at the WEPS energy rates excluding losses.

37. “Wheeling” charges
“Wheeling charges” not special charges – will be the standard network related tariff charges for the use of the network.
No link in charges between what the generator produces and what the load buys – charges are NOT dependant on ownership of energy.
The generator is charged for what is exported - at standard GUOS tariffs
The load is charged for what is delivered over the network - at standard tariffs – same as any other customer
Any use-of-system benefit /cost associated with a generator’s location accrues to that generator and not to the buyer
These charges are: network charges, the cost of losses, reliability services and for loads the associated subsidy contribution.
Contribution to socio-economic subsidies not avoided by a wheeling arrangement
No “credit’ given for network related charges – only energy.
A wheeling arrangement does not reduce the capacity required on the network.

38. How the reconciliation of energy is done for a wheeling transaction
1) The energy produced by the generator is measured on a time-of- use basis and allocated to the buyer(s) as agreed.
2) The amount of energy allocated is adjusted on the customer’s bill at the WEPS time-of-use energy rates less losses.
Losses and reliability service charges are excluded as these are use-of-system charges
3) Eskom will supply any energy not provided by the generator, in terms of the supply agreement signed with Eskom.
4) In future there may be balancing mechanism to ensure effective and fair day-ahead scheduling by all generators by the System Operator.

39. Reconciliation of accounts - wheeling
The purchaser of energy (the load) will receive a financial credit on the Eskom account for the net energy sent out by the generator.
The energy credit given to the purchaser (load) is at the base energy rate
Losses and reliability services network costs are therefore charged on energy delivered – as the credit excludes these costs

40. Treatment of costs of losses under wheeling
Technical losses are network related costs.
The load (purchaser) will pay for losses at the published loss factors for the energy wheeled.
Eskom will not calculate the actual cost of losses from the generator to the load
The load purchasing energy from a non-Eskom generator will not be treated differently from a load purchasing energy from Eskom
The charge for losses is currently bundled in the energy rates (not explicit).
The energy wheeled will be deducted on the bill at the WEPS tariff rates excluding losses and reliability services.
The benefit or cost of losses due to the generator (as applicable) will accrue to the generator – not the load.

41. The difference: (Winter)
210.56
= 14.20c/kWh

42. Offset of energy/net metering

43. Offset/net metering
Offset of own energy/net metering – grid becomes the “bank” for energy that is not consumed.
Co-generators
Renewable sources
Only applicable to large power users at this stage.
Challenges around:
Licenses/registration
Standards
Metering (AMI/smart meters/smart grid)
Administration/billing systems
National approach
Credit given shown be based on energy related costs not network costs – required unbundled rates
Month to month banking

44. Illustration of offset of energy
Eskom (import)
1900 kWh
Generator (export)
150 kWh
Import
Export
1900 kWh
NEG
250 kWh generated
150 kWh
Meter
Customer total consumption
2000 kWh
Generator supplies portion of its energy directly to its customer via its network.
Generator exports surplus generated energy onto Eskom’s network.
Eskom does not buy this energy but a financial credit adjustment is given to the customer (in lieu of purchasing the energy). Base energy rate x (Dx losses + Tx losses – 1)
Typically generator and customer same legal entity/company situated at same location.
Must be additional generation capacity installed by generator.
Requires 4 quadrant metering.

45. Reconciliation of accounts – offset of energy
A financial credit adjustment is given on the customer’s bill for the own-use energy exported onto the Eskom network.
The conditions for applying this scenario are:
The required regulatory approvals are in place.
A connection and use-of-system agreement has been signed.
The electricity supply agreement and amendment agreement have been signed.
Must be on an LPU tariff.
The generator and the load are the same legal entity/company and are situated at the same physical location.

46. The difference: (Winter)
(tariff)
= 0.00 c/kWh

47. Energy add-back

48. The conditions for applying this scenario are:
Energy add-back
The generator is connected to a municipal or customer network and Eskom is the buyer of the energy.
For this arrangement the energy owned by Eskom will be added to the customer’s bill. Therefore, Eskom bills the municipality or the customer for all the energy delivered by both the generator and Eskom.
The conditions for applying this scenario are:
The required regulatory and municipal approvals are in place.
The municipality or customer agrees to the arrangement and signs the amendment agreement to the supply agreement.
A connection and use-of-system agreement has been signed.
A PPA must be in place with Eskom.
It is recommended that a separate account is created to facilitate this arrangement.

49. Illustration of add-back of energy
Eskom/Buyer
900 kWh generated
Customer consumption
1000 kWh adjustment
NEG/Seller
100 kWh generated
Meter 1
900 kWh
Meter 2
100 kWh
PPA Meter 2
Physical flow
Contractual flow
This scenario occurs when an Eskom customer physically receives a portion of its energy directly from a generator e.g. a co-generator but where Eskom has entered into a PPA for this energy.
For this arrangement the energy owned by Eskom will be added to the customer’s account. Therefore, Eskom bills the customer for all the energy delivered by both the NEG and Eskom.
The conditions for applying this scenario are:
The required regulatory approvals are in place.
A connection and use-of-system agreement has been signed.
The electricity supply agreement and amendment agreement has been signed.
PPA must be in place with Eskom.

50. The difference: (Winter)
210.56
= 14.20c/kWh

51. Banking of energy

52. Banking of energy - Introduction
Generators at times may generate more energy than is consumed either at their own plant or by their contracted wheeling buyer within a specific month.
Generators may elect to sell this energy to Eskom – requires a PPA and can only do short term without a bid process.
In the absence of a market must allow banking of this excess energy - to be utilised either by themselves or by their contracted wheeling buyer at a later date
This is a need that has been identified by the industry – the viability of many projects may be affected unless banking is allowed.
Consultation on banking has been undertaken with the AMEU, EIUG, Transmission SO and other stakeholders.

53. Policy principles
A consumer will be permitted to bank generated energy that it has purchased or is for own use that has been exported onto the Eskom system but which is not consumed during that particular month, either by themselves or by another contracted consumer of that energy.
The conditions for month to month banking will be included in the electricity supply agreement or amendment to the supply agreement and will be subject to the signing of these agreements.
Month to month banking for IPPs above 1 MW will only be allowed where there will be infrequent and inadvertent over-generation relative to the associated load, i.e. not every month or more than 2 consecutive months.
Month to month banking of energy for IPPs of 1 MW and below will be allowed for infrequent and inadvertent over-generation for the following reasons:
The introduction of the Eskom IDM Standard Product Programme for renewable energy (rewards renewable technology that displaces existing load).
This generation typically will be rural customers with seasonal load profiles, i.e. will be seasonal banking and will not in these circumstances be inadvertent or infrequent.
Due to the size not expected to have a significant impact on the Eskom system.
The exemption will encourage small scale generations.
It has been requested by customers to make renewable technology more viable.
2018/09/17

54. Policy principles (continued)
All banking arrangements above 1 MW must be approved on a case-by-case basis by the Energy Banking Committee. Such a committee must be established to do this.
Banking will occur under wheeling and offset arrangements where energy is generated by a generator and is sold to a party other than Eskom or is for own use by the load associated with that generator.
Banking will be refused in cases where the generator’s maximum export capacity is exceeded unless permission has been obtained to do so.
The consumer/buyer of the energy will bank the energy and not the generator, but the right of dispatch for generators above 1 MW under month to month banking conditions remains with the with System Operator.
The month to month banking of energy will be treated as follows:
The excess generated energy that is banked will reflect as a credit on the customer’s account.
The credit will be calculated based on the energy rates applicable in the peak, standard and off- peak periods during which the excess generation occurs. The credit will be applied to energy only and not to other charges.
The credit balance on the customer’s account will reduce as and when the energy is used by the customer.
Any residual banked energy credit will be carried over to the following month.
2018/09/17

55. Policy principles (continued)
Once critical peak day pricing is introduced, the banked energy cannot be redeemed during critical peak day periods.
Energy generated but not consumed on a constrained day could in future be paid for by the System Operator. This specific issue is not dealt with further in this policy.
If either the generator or the load is not available for more than 24 hours the System Operator must be informed to be able to optimally dispatch.
Where due to an Eskom outage or fault the Eskom network is not available:
1) To provide supply to the load customer, but the generator is still able to generate and export onto the Eskom network; there will be no restrictions for the consumer of the energy on the amount of energy that is permitted to be banked, OR
2) To provide a connection to the generator; the buyer of the energy will be supplied by Eskom at the standard tariff rates.
Banking will be an additional service offering and therefore an Administration Charge will be payable to recover the costs of administering the banking process.
A once-off standard charge will be payable to provide access to the wheeling arrangement, e.g. a charge similar in nature to the standard charges currently levied for tariff conversions or changes in capacity supply size.
Where banking is approved for a customer, this does not enable a customer to avoid load shedding if general load shedding is in effect in the area.
2018/09/17

56. Policy principles (continued)
In cases where banking of energy occurs on a regular and/or continuous basis, Eskom reserves the right to either:
Enter into a short-term PPA with the generator instead of allowing banking; OR
Limit the amount of energy permitted to be banked.
In cases where the banking of energy places the Eskom grid/system at risk, then this would be considered an emergency condition and it will be necessary to issue instructions to the generator to reduce its generation. The integrity of the national grid should be paramount. In addition all generators will be subject to the dispatch rules, when approved.
Banking will only initially be allowed for customers on TOU tariffs and profile metering.
It must be considered that in future residential customers could have TOU/smart metering and may be able to bank excess energy during the day, e.g. from Photo Voltaic (PV) panels. This, however, will have a significant impact on Eskom from a technical, legal and financial point of view and requires a national framework. Therefore this will be dealt with under a separate project.
2018/09/17

57. Conditions for issuing cost estimate letters and budget quotations for generators

58. Cost estimate fee
The cost estimate fee was introduced on 01 October 2013 where a cost estimate letter is to be prepared.
The fee will be raised and payable prior to issuing a Cost Estimate Letter to the customer, where applicable.
The Cost Estimate Fee will be charged to cover the costs involved in the preparation of a Cost Estimate Letter for customers.
Where a customer accepts a Cost Estimate Letter, this Cost Estimate Fee, together with the Quotation Fee, shall be applied by Eskom in the reduction of the Connection Charge Estimate determined in terms of the Budget Quote and will be forfeited by the customer in the event that the customer does not accept the Budget Quote or fulfil the conditions as set out in the Budget Quote.
The Cost Estimate Fee is based on the Engineering Council of South Africa (ECSA) rates and estimated hours to prepare a cost estimate.
9/17/2018

59. Cost estimate Fees applicable
Project size
Cost estimate Fee applicable
Micro: 0 – 350 kVA/kW
No cost estimate fee as cost estimate letters only raised for major works projects.
Major 0 – 350 kW
R13 000
Small: > 351 kVA/kW – 1 MVA/MW
R13 000
Large: > 1 MVA/MW – 50 MVA/MW
R52 000
Key: > 50 MVA/MW
R78 000
These Cost Estimate Fees will be updated annually.
9/17/2018

60. Conditions for issuing a cost estimate letter

61. Conditions for issuing a budget quotation

62. THANK YOU