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 />
Page 47 of 144<br />
possible impact of higher electricity prices on the economy and consumers on the other. It<br />
supported <strong>Eskom</strong>‟s ultimate goal of being able to raise funding for capacity expansion based<br />
on the strength of its own balance sheet, as opposed to using the government‟s support, as<br />
is currently the case. The National Treasury concurred with <strong>Eskom</strong>‟s assumption that no<br />
dividends would be paid out to the shareholder during MYPD 3.<br />
The returns generated over the MYPD 3 period are less than the returns determined by<br />
Nersa and achieve an appropriate balance between the needs of <strong>Eskom</strong> and its customers.<br />
They therefore remain as projected in the proposed submission.<br />
Macroeconomic indicators<br />
Some of the proposed application‟s macroeconomic assumptions were questioned.<br />
Specifically, the National Treasury‟s CPI projections were lower. It believed the proposed<br />
electricity price increases would have a more pronounced effect on the CPI than <strong>Eskom</strong><br />
predicted because of the planned reweighting of the CPI basket, adding between 0.7 and 1<br />
percentage points to CPI as opposed to <strong>Eskom</strong>‟s projected 0.3 to 0.6 percentage points.<br />
The National Treasury requested that further information on the economic impact be<br />
included in the application. This has been done.<br />
Assumptions regarding coal costs and the Energy Conservation Scheme<br />
There were concerns regarding <strong>Eskom</strong>‟s assumption of single-digit coal cost increases. It<br />
was suggested that the macroeconomic impact – specifically the possible unintended<br />
consequences of securing coal supplies for <strong>Eskom</strong> and limiting the increase in coal prices to<br />
single-digit increases – be assessed.<br />
Since primary energy constitutes a third of <strong>Eskom</strong>‟s costs, it is critical for the company to<br />
exhaust all avenues to keep these cost increases within single digits. The broader economic<br />
impact will be assessed further.<br />
It was suggested that introducing a mandatory ECS required prior policy decisions by the<br />
DoE. <strong>Eskom</strong> accepts that there are certain policy decisions needed to inform the way<br />
forward on these matters.