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Electricity Regulation Act, 2006 (Act No. 4 of 2006)


Regulatory Rules for Power Purchase Cost Recovery

15. IPP Control Account


15.1 The IPP control account will be kept by the buyer recording the sum of all under- and over-recoveries of recoverable power purchase costs in each financial year. This balancing account will accumulate each year’s under- or over-recovery in a given period of time i.e three years, including interest as calculated with reference to the Prime Rate;


15.2 A trigger will be set so that if the quantum of the IPP control account exceeds, in absolute value, +/- 2% of the buyer’s revenue allowance for the most recent year, the balance account will be drawn down by way of adjustment to the next year’s regulated revenue allowance. In respect of any indexed portions of PPA tariff payments, as required by the prevailing circumstances, which have fallen outside of the projected revenue requirement, the buyer may request a more frequent recovery of such indexed payments from NERSA;


15.3 In exceptional circumstances (e.g. such as a buyer buying out a PPA) once-off recoverable costs may need to be smoothed over a period as determined by NERSA at the time to prevent price shocks to consumers. This smoothing of cost recovery would not apply to more normal workings of a PPA including variable fuel costs or energy purchases;


15.4 Regardless of the quantum of the IPP control account at the end of a three year control period, the full amount will be drawn down as an off-set (plus or minus) against the revenue allowance set for the next period;


15.5 For the avoidance of doubt, the use of the trigger mechanism is to limit administrative costs of this recovery mechanism. Any balances remaining at the end of the three year control period will be reconciled by way of adjustment to the following three year control period’s revenue allowance;