Part 1 Revenue Application: Multi-Year Price Determination ... - Eskom
Part 1 Revenue Application: Multi-Year Price Determination ... - Eskom
Part 1 Revenue Application: Multi-Year Price Determination ... - Eskom
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Overview of <strong>Multi</strong>-<strong>Year</strong> <strong>Price</strong> <strong>Determination</strong><br />
2013/14–2017/18 (MYPD 3)<br />
o The MYPD 3 period will follow a five-year price path.<br />
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Long-term decisions regarding who will build South Africa‟s future generating<br />
capacity and what form that capacity will take have yet to be made. These<br />
decisions will have consequences for <strong>Eskom</strong>‟s current revenue request. For<br />
illustrative purposes, <strong>Eskom</strong> has modelled the consequences of being allocated<br />
65% of the new capacity identified in the DoE‟s IRP 2010. An additional scenario<br />
where <strong>Eskom</strong> builds 100% capacity is also shown.<br />
Nersa needs to consider, as part of its deliberations, whether this revenue<br />
application should be based only on known decisions (in other words, up to the<br />
completion of the current new build programme) or whether it should consider<br />
the industry‟s longer-term revenue requirements.<br />
The current MYPD period ends on 31 March 2013. <strong>Eskom</strong> must submit an application to<br />
Nersa, which will determine the country‟s electricity price adjustment for the next period and<br />
tariff structure for 2013/14. In contrast to MYPD 1 and MYPD 2, both of which spanned three<br />
years, <strong>Eskom</strong> is proposing a five-year determination for MYPD 3, running from 1 April 2013<br />
to 31 March 2018. This is to ensure a more gradual and predictable price path for<br />
households, businesses, investors and the country as a whole.<br />
South Africa needs an adequate, reliable electricity supply to build the economy and<br />
promote social development. This supply comes at a cost – a cost that electricity prices are<br />
not currently fully covering. Electricity prices have been moving towards cost reflectivity<br />
since MYPD 1. MYPD 3 continues this trajectory. Cost-reflective prices will enable <strong>Eskom</strong> to<br />
recover the cost of producing electricity while supporting the financing needed to build the<br />
extra capacity it has committed to build. They are necessary for both <strong>Eskom</strong>‟s financial<br />
health and the sustainability of the country‟s expanding electricity industry as a whole.<br />
The route to cost reflectivity needs to be carefully chosen. <strong>Eskom</strong> and the government are<br />
committed to an electricity price path that moves towards cost reflectivity while mitigating the<br />
impact on the economy and offering protection to low-income households. Such a path<br />
needs to balance the short-term needs of vulnerable economic sectors with the long-term<br />
growth needs of the economy as a whole. Finally, it needs to demonstrate that South Africa‟s<br />
electricity industry is a viable, sustainable prospect to support investment, both in future