Electricity Regulation Act, 2006 (Act No. 4 of 2006)RulesRegulatory Rules for Power Purchase Cost Recovery3. Principles |
| 3.1 | Recovery of cost-effective power purchases |
| 3.1.1 | In addressing the key objectives set out above, the overarching principle is that power purchases covered under these rules are to be procured by the buyer on a cost-effective basis. This overarching principle is fundamental to each of the objectives, and has been shown in numerous jurisdictions to provide a robust and practical benchmark for assessing the long term benefits to customers of power purchases. Subject to other relevant principles and conditions set out in these rules, this cost-effectiveness benchmark will set the primary hurdle for recovery of power purchase costs by the buyer as part of its regulated revenue allowance. |
| 3.1.2 | In assessing the cost effectiveness of power purchases, factors that will be considered include |
| (a) | the cost of alternative supply options; |
| (b) | direct cost of power purchase, inclusive of fuel; |
| (c) | timing (time-of-use differentials and date of commissioning); |
| (d) | network (locational) benefits and costs; |
| (e) | security of supply; |
| (f) | firmness of supply; |
| (g) | laws and regulations as well as environmental considerations; |
| (h) | fuel diversification objectives; and |
| (i) | quantifiable risks |
| 3.1.3 | The principle of cost-effectiveness will apply across a range of generation supply solutions including (but no [sic] limited to) Small Power Projects, greenfields or brownfields projects and domestic or cross- border projects. |
| 3.1.4 | Where found to be cost-effective (and subject to other conditions set out in these rules) power purchase costs would be passed through to customers. |