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

Overview of Multi-Year Price Determination
2013/14–2017/18 (MYPD 3)
Page 97 of 144
sales of demand-management interventions. This chapter examines Eskom‟s sales forecast
for MYPD 3, the assumptions on which it is based and the role and costs of IDM.
Eskom‟s ability to deliver enough capacity to meet the sales forecast is in part determined by
the EAF of its generating plants, which in turn is influenced by the maintenance schedule
followed. Many of Eskom‟s power stations are more than 30 years old and as they age, they
require more maintenance. Eskom has also run its power stations at high load factors in
recent years because of constraints on supply, and this has added to the need to maintain
and upgrade plant and equipment. Maintenance work generally requires that units be taken
out of service while maintenance is being done, and in an environment of constrained
supply, finding the capacity to do that has been a challenge. In recent years the constrained
supply-and-demand situation often led Eskom to shift planned maintenance work in order to
ensure it had the generating capacity available to meet demand. This led to a maintenance
backlog, which Eskom has been addressing since 2011. This chapter puts forward
arguments as to why it was not a sustainable approach to defer maintenance and how
Eskom is addressing the maintenance challenge. The exact maintenance costs are
contained under operating expenses in the chapter, Moving towards a sustainable electricity
industry.
Eskom‟s current expansion programme will help improve the constrained electricity situation
in the medium term, especially after 2015, by which time both of the new coal-fired stations
will have started generating power for the grid. However, according to IRP 2010, the country
needs about 45 000MW of additional generating capacity (over and above Eskom‟s
committed build programme) in order to guarantee long-term security of supply. How this
capacity is apportioned will affect the trajectory of Eskom‟s prices.
5.1 MYPD 3 sales forecast
A crucial building block of Eskom‟s price increase application is the sales forecast. The sales
forecast is based on the assumption that South Africa will experience modest economic
growth and, consequently, slow growth in electricity demand during the MYPD 3 period.
In turn, the sales forecast forms the basis of projections of the true operating costs for
MYPD 3. For example, the amount of primary energy to be purchased depends on how
much energy will need to be generated, which in turn depends on the sales forecast. (Refer