Part 1 Revenue Application: Multi-Year Price Determination ... - Eskom

Steady GDP growth
Overview of Multi-Year Price Determination
2013/14–2017/18 (MYPD 3)
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GDP growth is expected to remain relatively steady for two more years, with a slight
increase expected only after 2014/15. Electricity use generally grows slower than economic
growth, so GDP growth and electricity sales growth are expected to continue to diverge.
Lower commodity prices
With the exception of gold, most commodity prices have not reached pre-recession levels.
As a result, Eskom‟s mining customers are not fully utilising their smelting facilities and,
when they do, they are using more energy-efficient furnaces. The sales forecast assumes
this will continue for at least the next two years, after which an increase in energy
consumption is expected. In the case of platinum, growth will be driven by new projects and
expansion by existing customers, whose projects are currently on hold.
Although the price of gold is at record levels and is expected to keep rising, gold mines
remain under pressure to reduce costs and are closing high-cost shafts. The current gold
price is partially driven by its status as a safe economic haven. There is limited investment in
new mines, compounded by the fact that most remaining ore deposits are very deep and
expensive to extract.
Reduction in exports
Exports to Botswana have substantially reduced in anticipation of an increase in that
country‟s internal generation capacity. This has resulted in a decrease of 22.8% in
international sales in 2012/13 compared to 2011/12.
Increasing prices
Given that present electricity prices are not yet cost reflective, further real increases are
inevitable at least up to 2018. Increasing electricity prices provide consumers with a clear
price signal to limit use in order to reduce costs.
Inclining block tariff
It is assumed that the IBT will continue to encourage residential users to limit usage as a
way to contain their costs through the MYPD 3 period.