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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Operating efficiencies target<br />
Overview of <strong>Multi</strong>-<strong>Year</strong> <strong>Price</strong> <strong>Determination</strong><br />
2013/14–2017/18 (MYPD 3)<br />
Page 69 of 144<br />
During the approval of the corporate plan to 2017/18 <strong>Eskom</strong> set a target to reduce its<br />
operating costs by R33 billion between 2012/13 and 2017/18, of which R30 billion will be<br />
saved during the MYPD 3 period. The Executive Committee (EXCO) set up a subcommittee<br />
to investigate and drive the implementation of this target across the organisation. The work<br />
is continuing with no final decision on the allocation across the business or licensees.<br />
For the purposes of the MYPD 3 submission, the approach was to allocate the savings to the<br />
three licensees based on their own operating costs (human capital and operating costs)<br />
incurred. The respective licensees costs are divided into the total operating costs for the<br />
three combined which equates to a savings allocation of 44% to Generation, 51% to<br />
Distribution and 5% to Transmission. It must be highlighted that once the savings<br />
subcommittee completes its mandate, the allocations will change across the business or<br />
licensees. <strong>Eskom</strong> is not asking the consumer to contribute to this as the R30 billion is<br />
excluded from the utility‟s revenue requirements for the MYPD 3 period.<br />
Table 27: Assumed operating expenses savings<br />
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 MYPD 3<br />
Total<br />
allocations<br />
Distribution (Rm) - 1 519 - 2 945 - 3 060 - 2 979 -3,085 - 3 235 - 15 304 51%<br />
Transmission (Rm) - 174 - 335 - 284 - 267 -261 - 386 - 1 534 5%<br />
Generation (Rm) - 1 307 - 2 720 - 2 655 - 2 754 -2,654 - 2 379 - 13 162 44%<br />
Total savings (Rm) - 3 000 - 6 000 - 6 000 - 6 000 - 6 000 - 6 000 - 30 000 100%<br />
Corporate overheads<br />
<strong>Eskom</strong>‟s corporate costs are driven by two substreams: service functions and strategic<br />
functions. The principle of corporate costs that are recovered is based on achieving a<br />
breakeven situation. Corporate costs are either directly recovered from the business or<br />
indirectly recovered via a corporate overhead presented below.