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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2.3.2 MYPD 2<br />
Overview of <strong>Multi</strong>-<strong>Year</strong> <strong>Price</strong> <strong>Determination</strong><br />
2013/14–2017/18 (MYPD 3)<br />
Page 40 of 144<br />
The current three-year determination, MYPD 2, began on 1 April 2010 and runs to 31 March<br />
2013. Late in 2009, <strong>Eskom</strong> submitted an application that translated to a 35% annual average<br />
increase over the three years of MYPD 2. In February 2010, after extensive public<br />
consultation, Nersa granted <strong>Eskom</strong> annual increases averaging 25%, which would have<br />
raised the average price to 65.85c/kWh by the final year of the period (2012/13). Nersa<br />
indicated at the time that two further years of 25% increases may be required to enable<br />
electricity prices to reach cost-reflective levels by 2014/15. <strong>Eskom</strong> implemented the<br />
increases for the first two years of MYPD 2 but reduced its revenue requirement early in<br />
2012, submitting a request to Nersa to implement a 16% average increase for the final year<br />
of MYPD 2. Nersa granted this request on 9 March 2012.<br />
<strong>Eskom</strong>‟s request for the lower increase for the last year of MYPD 2 was made possible by<br />
the 25% annual price increases of the previous two years, the introduction of cost<br />
efficiencies and rephasing in the capital expenditure programme, below-forecast electricity<br />
demand, and government support in terms of a return sacrifice. <strong>Eskom</strong>‟s strong financial<br />
position gave it some flexibility to phase in its capital expenditure and debt drawdowns<br />
without jeopardising its ability to keep the lights on in the short term. Additional increases are<br />
still necessary for longer-term security of supply.<br />
MYPD 1<br />
2006/07<br />
R36.7 billion;<br />
5.1% annual<br />
increase<br />
2007/08<br />
MYPD 1<br />
decision R40.1<br />
billion; 5.9%<br />
annual increase<br />
2008/09<br />
• MYPD 1<br />
decision R44.5<br />
billion; 6.2%<br />
annual<br />
increase<br />
• Implemented<br />
rule change<br />
approval R50.8<br />
billion; 27.5%<br />
annual<br />
increase<br />
Interim<br />
increase<br />
2009/10<br />
• No MYPD<br />
decision<br />
• Interim tariff<br />
adjustment<br />
R62 billion;<br />
31.3% annual<br />
increase<br />
Figure 4: <strong>Revenue</strong> and price increases from 2006/07 to 2012/13<br />
MYPD 2<br />
2010/11<br />
R85.2 billion;<br />
24.8% annual<br />
increase<br />
2011/12<br />
R109.9 billion;<br />
25.8% annual<br />
increase<br />
2012/13<br />
• Original decision<br />
in MYPD 2 of<br />
R141.4 billion;<br />
25.9% annual<br />
increase<br />
• Revised<br />
decision of<br />
16% due to<br />
rephasing<br />
returns and<br />
Regulatory<br />
Clearing<br />
Account<br />
• <strong>Revenue</strong> R130.3<br />
billion; 16%<br />
annual increase