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Electricity Price Increase 2008/9
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Introduction & Background
Multi-Year Price Determination 2005 allowed 6.2% increase for 2008/9. Eskom applied for 18.7% increase in April 2007 for 2008/9. Energy Regulator approved 14.2% increase on 20 December 2007 for 2008/9. Eskom accepted the 14.2% increase on 18 January 2008. Eskom applied for 53% increase in April 2008 for 2008/9. Presidency 19 MAY 2008
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53% increase for 2008/9 Eskom lodged an application for a 53% increase for 2008/9 and 43% increase for 2009/10 on 18 March 2008, citing the following as reasons for the application: Changes in the Primary Energy costs (i.e. Coal and fuels) Accelerated Demand Side Management costs. Presidency 19 MAY 2008
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Financial Modelling Assumptions
10% reduction in consumption (Power Conservation Program) R60bn Shareholder loan phased in over 5 years Maximum self-borrow amount R30bn per annum over the next 5 years Pass through of primary energy costs Total Capital expenditure over 5 years R343bn. 10% Return on Assets from 2009/10 onwards Presidency 19 MAY 2008
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Pricing Scenarios Presidency 19 MAY 2008 Scenarios
2008/9 Real Price increase 2008/9 Revenues Additional revenues above MYPD Eskom under recovery of PE over MYPD Eskom under recovery of DSM over MYPD Profit after interest before tax in 2008/9 2009/10 Real price increase (Estimate) MYPD 1% R44.5bn R0bn R15.4bn R2.5bn 1. Rule Change 9% R47.9bn R13bn -R7.9bn 98% 2. Primary energy 2008/9 28% R53bn R5.3bn R7.5bn -R0.3bn 69% 3. Primary energy full MYPD 47% R61bn R7.6bn 48% 4. Primary energy 2008/9 + DSM 33% R55bn R7.3bn R0.5bn R3.3bn 64% 5. Primary energy full + DSM full 53% R63bn R15.5bn R12.7bn 43% Presidency 19 MAY 2008
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Timelines Presidency 19 MAY 2008
ITEM/ACTIVITY ACTUAL/TARGET DATE Eskom’s Application Received by the National Energy Regulator of South Africa (NERSA) 18 March 2008 Energy Regulator approves process and timelines 28 March 20008 Electricity Subcommittee of the Energy Regulator considers confidentiality request by Eskom and NERSA’s consultation paper 07 April 2008 Publication of NERSA consultation paper and Eskom’s application. Invitation for written public comments will also be issued. 08 April 2008 Deadline for submitting written public comments to NERSA 29 April 2008 Closing date for registering to attend and/or present at the Public Hearing 19 May 2008 Public Hearing 23 May 2008 Electricity Subcommittee meeting to consider recommendation to the Energy Regulator 27 May 2008 Energy Regulator considers and decides on Eskom’s application for price increase for 2008/09 06 June 2008 Presidency 19 MAY 2008
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Consultation Paper 8 April 2008
Primary Energy costs restriction methods Contributions by primary energy suppliers (especially coal mines) Funding methods for the Demand Side Management program Necessity and adequacy of the R12.7bn profit after tax due to the 53% increase Other forms of Government assistance Commitments from Eskom if increase is granted Presidency 19 MAY 2008
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370 responses from Experts, consumer groups, Concerned citizens.
Responses such as: No, No, No, No Allow 100% increase now rather than 2009/10 Allow the 53% increase to stop the load shedding Government must fund the shortfall. Presidency 19 MAY 2008
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Way Forward Analysis of the Eskom application.
Analysis and incorporation of the inputs from stakeholders, including 16 May 2008 summit resolution. Evaluation of the coal and fuel contracts. Evaluation of the Demand Side Management Plans. Position Paper of the Energy Regulator will be issued before the Public Hearing Conducting radio interviews in all regions to explain processes and clarify matters Presidency 19 MAY 2008
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Thank you Presidency 19 MAY 2008
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