Virtual wheeling will not impact municipal revenue, and pilot projects are providing useful lessons for the future of energy wheeling in South Africa.

This was the message from a webinar entitled Breakthrough in Municipal Wheeling, hosted by ESI Africa and Enlit Africa.

Onicah Rantwane, Chief Advisor: Electricity Pricing at Eskom, took the time to dispel some of the myths swirling around virtual wheeling. She emphasised that the utility’s introduction of virtual wheeling would in no way take away from municipalities’ ability to derive revenue from their electricity provision services.

While traditional wheeling is applicable to medium and high voltage connected supplies, virtual wheeling will be applicable across low voltage (as well as medium and high) supplies, increasing the number of businesses able to take advantage of the new contracting format.

She pointed out that virtual wheeling will now allow multiple off-takers to source electricity from multiple generators, but this would only work within South Africa’s borders.

Have you watched?
Breakthrough in municipal wheeling

Eskom and new contracting methods

Virtual wheeling contracts do not require an amendment to the electricity supply agreement the off-taker has with Eskom, as the wheeling credit is provided to the buyer of the electricity as a refund.

“It is a myth that virtual wheeling will resolve the municipal debt issue, and there won’t be a requirement for municipalities to be in good standing to participate. We will still require the municipalities to be in good standing because Eskom can only provide the refund to the buyer where the municipality is in good standing.

“The refund is because there is an overpayment, so we can only pay if we receive the payment for the account,” said Rantwane.

Still, the issue is not yet settled, she said.

“The matter has been escalated to NECOM to propose alternatives. It’s something Eskom and municipalities are aware of. And we have sought assistance from government on this,” said explained.

Have you read?
Virtual wheeling by Eskom 101

Wheeling pilot in Cape Town

Donovan Leeuwendaal, Manager: Finance and Commercial at the City of Cape Town, said their foray into energy wheeling via a pilot project has provided many answers and even more questions about policy and regulation around how this has to work.

The City of Cape Town is considering a blended tariff model that incorporates fixed and variable costs as well as multiple stakeholders, but ultimately takes into consideration that the world of electricity provision has changed.

“It’s not a simple one-way flow anymore,” said Leeuwendaal.

Of interest
Vodacom’s virtual wheeling project with Eskom

The Metro has not fixed its tariff methodology in stone yet. But has started settling on some non-negotiable principles that must be considered. These include issues such as all meter data must reflect the same style and timing of recording usage or exactly how many readings need to be taken to accurately represent time of use.

“From the beginning, we said there will be no banking of energy; it represents a particular challenge to billing and how that accumulates over time. We wanted to remain revenue neutral and maintain cross-subsidies,” said Leeuwendaal.

The Metro wants to ensure that losses are taken into account. “It’s easily forgotten and can have a significant impact,” he said.

Of reference
Cape Town wheeling pilot project starts generating clean power

What do people think of municipal wheeling?

Responding to the poll question ‘What barriers or challenges do you foresee in implementing wheeling agreements’ –  46% of webinar respondents cited regulatory hurdles, while 24% thought lack of knowledge or expertise was the biggest problem. Technical complexity came in at 16%, financial constraints at 10% and negotiating terms with energy providers came in last at 4%.

A second poll question around what people consider to be the primary advantage of wheeling agreements saw 44% of the audience respond that access to renewable energy was their first concern, followed closely by 34% who said energy reliability and resilience were their motivation. Only 14% said cost savings were most important, and carbon footprint reduction came in at 8% as the overriding concern.

Watch the municipal wheeling webinar to find out more about:

• What is needed from the buyer to get into virtual wheeling;
• What billing would look like for the customer;
• What balancing of the energy on the grid would look like from the municipality’s point of view;
• Challenges to designing a framework governing tariffs; and
• Potential contractual arrangement issues. ESI

Access the webinar here
Breakthrough in municipal wheeling