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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The choice, then, is stark. The negative effects of electricity price increases in the short term
must be weighed against the benefits of having an adequate, reliable electricity supply to
enable the economy to expand in the long term. Without an adequate supply of electricity,
South Africa will stagnate. Ultimately, Eskom‟s financial sustainability – and its ability to meet
the country‟s electricity needs – is linked to South Africa‟s future.
South Africa‟s electricity prices have already increased significantly off a low base (see
Figure 7). This application sees them increasing further. Eskom is acutely sensitive to the
fact that its proposed price increases will have some negative effects on the economy,
particularly on more vulnerable economic sectors and poorer households. Eskom strongly
supports the principle of targeted protection for poor households and believes this should be
provided for in the tariff structure, with transparency on the cross-subsidies involved.
Figure 7: Real and nominal electricity prices in South Africa (1974–2011)
Eskom would like to emphasise that, if the revenue required for ensuring South Africa‟s
security of electricity supply is not secured through price increases, it will have to come from
another source. One alternative would be for the government to increase its equity
injections, which would in turn require an increase in taxes. Eskom has modelled the effect
of an increase in VAT, personal tax or company tax on the South African economic
landscape. The outcome of such taxes was found to be unpalatable for the country‟s
citizens, its businesses, and for Eskom itself.