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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disproportionately benefit those who use the most electricity. Such an approach would come
at a high cost to Eskom, in lost revenue, and to the economy, by expanding the need for
generating capacity. This is especially so given that consumption by vulnerable sectors is
likely to be relatively small in the context of total demand for electricity.
Generally speaking, it is more economically efficient and socially equitable to implement
targeted electricity subsidies for poor households and consider other targeted interventions
for vulnerable sectors. Eskom believes these subsidies for industry, manufacturing or other
business sectors are a matter of national industrial policy and should be addressed through
the fiscus.
Eskom would like to point out that, although it supplies electricity directly to its 134 largest
customers, including South Africa‟s most energy-intensive firms, most manufacturing and
commercial enterprises receive their supply from municipalities, whose pricing structures are
different. An Eskom study of the six metropolitan areas it supplies found that average prices
charged to end users were between 40% and 110% higher than the prices Eskom charges
its direct customers. The impact on municipal customers of electricity price increases is
therefore likely to be greater than the effect on non-municipal customers. Any assessment of
the effect of the proposed tariff increases on manufacturing and commercial enterprises, and
on small business, must factor municipal tariff structures into account.
4.5.1 The role of energy efficiency
Any sector or business with the scope to deploy energy efficiency measures in the short to
medium term would benefit from doing so. A key question is how much room remains for
South Africa‟s businesses to become more energy efficient. This is crucial to assessing the
potential severity of the proposed MYPD 3 price increases.
The evidence on South Africa‟s current efficiency is mixed. According to a 2011 survey of 32
firms across 17 economic subsectors, conducted by DNA Economics on behalf of the
National Treasury, energy efficiency levels in South Africa compare favourably with
international norms. This suggests there is not much opportunity for further efficiency gains.
Based on the response that Eskom continues to have to its demand-side management
initiatives, Eskom believes there is considerable scope for further energy efficiency in South