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

Overview of Multi-Year Price Determination
2013/14–2017/18 (MYPD 3)
Page 57 of 144
Historic underinvestment, changes in environmental legislation and technical
factors have led to higher operating costs at Eskom‟s cost-plus mines.
Long distances between some power stations and the mines, especially those
returned to service, have increased transportation costs.
The following steps have been taken to mitigate the risks related to coal supply:
Eskom has contracted a number of junior mining houses to provide coal over the
short and medium term. However, many of these mines are marginal, with high
investment and production costs.
All major new sources of coal will be contracted for the life of the resource to
minimise overall costs, reduce supply risk and create price stability.
Eskom is migrating a significant portion of its current coal-transport volume from
road to rail, which is significantly more cost effective in the long term.
Eskom is investigating the cost implications of beneficiation, purifying coal to a
level that is more suitable for Eskom‟s coal-fired generation fleet.
Table 12: Type of coal contracts by volume (Mt)
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 MYPD 3
Existing dedicated cost-plus mines (Mt) 54 53 54 51 47 46 251
Existing multi-product mines (Mt) 30 34 36 42 46 44 202
New long term mines (Mt) 6 15 21 26 68
Medium term mines (Mt) 44 44 37 28 27 25 161
Total coal (Mt) 128 131 133 136 141 141 682
Water and water treatment
Water volume consumption, which depends on the amount of electricity generated, is
expected to remain relatively constant over the MYPD 3 period. However, as the projections
in Table 13 indicate, the unit cost of water is expected to more than double as the
Department of Water Affairs expands infrastructure. The projections do not make provision
for the additional 10% price increase that the department may impose to reflect water
scarcity in South Africa.
Table 13: Water costs and usage projections
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 MYPD 3
Water consumption per station (ML) 348 129 348 129 347 461 347 100 340 027 337 020 1 719 737
Rand per million litres 4 400 5 982 6 947 7 533 8 088 8 768 7 452
Total costs (Rm) 1 532 2 082 2 414 2 615 2 750 2 955 12 816