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

Overview of Multi-Year Price Determination
2013/14–2017/18 (MYPD 3)
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minimise the impact of coal road transport on communities and to rehabilitate Mpumalanga‟s
roads where feasible. Road-repair costs include only those rephased from MYPD 2.
Subsequently, prioritised road repairs are being undertaken by the relevant national and
provincial road authorities. Funding is through the fiscus, where a contribution is made
through the increased environmental levy.
Higher growth impact
If a higher energy demand is experienced, the key impact is the utilisation of additional coal.
The impact of a higher annual average economic growth rate of 2.3% compared to Eskom‟s
assumption of 1.9% will require an additional 8 500Mt of coal (over the five year period) at
an average cost of R347 per ton. The resultant overall additional cost for coal would be R3
billion were this higher growth rate experienced.
Table 15: Higher growth impact
Higher growth impact 2013/14 2014/15 2015/16 2016/17 2017/18 MYPD 3
MYPD3 coal production (GWh) 222520 226956 236035 238849 244226
Change in demand (2,3% Vs 1,9%) 0.40% 0.40% 0.40% 0.40% 0.40%
Change in coal production (GWh) 890 908 944 955 977 4,674
Extra coal required (Mt) 1,618 1,651 1,717 1,737 1,776 8,499
Coal cost R/t 294 316 327 377 416
Additional coal costs (Rm) 476 522 561 655 739 2,952
Average cost of extra coal over MYPD3 347
3.4.2 Independent power producers
IPPs affect Eskom‟s costs in two ways. First, all IPPs have to be integrated into Eskom‟s
transmission grid. These costs fall under Transmission‟s capacity expansion programme.
Second, once integrated into Eskom‟s grid, Eskom has to pay the IPPs for energy purchased
at a c/kWh rate. IPP costs are calculated based on rates provided by the DoE and total
R78 billion (gross) over the MYPD 3 period. This cost is offset by savings in Eskom‟s primary
energy expenditure resulting from reduced demand on Eskom‟s generating facilities because
of these energy purchases, calculated at an average of 15c/kWh over the MYPD 3 period.
The introduction of further IPPs also provides an opportunity to relieve the constraint in the
electricity system. Based on the assumption that demand remains constant, the calculated
savings in primary energy costs will total R3 billion for MYPD 3. Despite this deduction, IPP