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

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Overview of Multi-Year Price Determination 2013/14–2017/18 (MYPD 3) Page 48 of 144 The National Treasury and Salga also felt that an ECS should only be used as a last resort. Eskom agrees, but has retained ECS in its submission as it is meant as a safety net that will need to be implemented quickly in case of a supply emergency. It has not requested any revenue for ECS during MYPD 3. Costs Concerns were expressed regarding certain costs and the efficiency of Eskom‟s technology choices. A request was made for Nersa to scrutinise these costs. This is indeed a part of the process. Other issues In general, there was support for Eskom‟s proposals regarding: Conclusion Protection of the poor. Aligning the price increase date for Eskom‟s non-municipal customers to 1 July, when price increases for municipal tariffs take effect, although further analysis of the impact of this approach has led to a decision not to implement this change at this stage. Restructuring residential and municipal tariffs, subject to consultation with Salga and Nersa. Enhancing cross-subsidy transparency. The methodology used to value assets (depreciated replacement costs). The input by National Treasury and Salga is greatly appreciated. It has been constructive and has shaped this final application.
Overview of Multi-Year Price Determination 2013/14–2017/18 (MYPD 3) 3 MOVING TOWARDS A SUSTAINABLE ELECTRICITY INDUSTRY Key points Page 49 of 144 Cost-reflective prices represent the true cost of generating, transmitting and distributing electricity. Eskom‟s prices are currently not cost reflective. The application proposes a five-year price path towards cost-reflective prices. The revenue request consists of four components: primary energy costs, operational costs, depreciation and return on assets (both calculated using depreciated replacement value). Nersa‟s approved prices should cover the costs of all these components, provided they have been prudently incurred. Cost-reflective prices support the financial viability of Eskom and the energy industry. This in turn improves security of supply by enabling Eskom to continue with its operations and obtain optimum financing for capacity expansion, as well as providing the correct price signals to encourage users to use electricity efficiently. Economic modelling shows that one alternative to cost-reflective prices – increased taxes – would have undesirable consequences for the economy. The key issue is finding an optimal migration path to reach cost-reflective prices. Electricity prices have a direct influence on Eskom‟s credit rating. The longer prices take to achieve cost reflectivity, the longer Eskom will have to rely on government guarantees to secure financing. Electricity prices also have a direct impact on Eskom‟s ability to service existing debt, which was secured with the help of government guarantees to the value of R350 billion. Eskom‟s ability to service its debt is therefore as important for South Africa as it is for the company. An appropriate price trajectory can support investment in IPPs. It can also give electricity consumers who have the ability to generate or co-generate their own electricity the correct price signals to do so.
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Page 3 and 4: Overview of Multi-Year Price Determ
Page 5 and 6: EXECUTIVE SUMMARY Introduction Over
Page 9 and 10: ESKOM PROFILE Overview of Multi-Yea
Page 21 and 22: 1.4.2 Independent power producers O
Page 31 and 32: Price path: Funding: Other: Overvie
Page 37 and 38: 2 THE MYPD PROCESS Key points Overv
Page 39 and 40: Electricity Pricing Policy Overview
Page 41 and 42: Accomplishments during MYPD 2 Overv
Page 43 and 44: Base case application Overview of M
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Page 59 and 60: Environmental levy Overview of Mult
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Page 73 and 74: 3.5.2 Carbon tax Overview of Multi-
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Transmission Overview of Multi-Year
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Part 1 Revenue Application: Multi-Year Price Determination ... - Eskom

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