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MYPD2 SACCI VIEWS AND RECOMMENDATIONS TO NERSA 21 January 2010 Peggy Drodskie Executive Advisor to the CEO
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OVERVIEW Introduction Fundamentals of Generation Macro-economic Impact – Inflation, GDP and Employment National Energy Policy Other Challenges Solutions Interim Actions Stakeholder Summit
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INTRODUCTION SACCI constituents: –Chambers across South Africa –Uni-sectoral Associations –Corporates Three pronged approach. NERSA Issues Paper Membership survey.
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Fundamentals of Generation Availability and cost of water and coal. Environmental cost. True cost comparisons of alternative energy sources. Political cooperation in the region, particularly SADC.
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MACRO-ECONOMIC IMPACT Tariff increases since 2005 – 91% Weighting in CPI – 1,87% Assumptions: –Municipalities pass on full increase. –Reserve Bank does not increase interest rates too drastically.
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IMPACT ON INFLATION Inflation: Producers and retailers increase prices. Inflation increase of about 0,3% - above 3% - 6% SARB target. Reduced personal disposable income and household consumption spending. Increased interest rates. Lower employment.
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IMPACT ON GDP Assume about 15% of output is electricity intensive. Some reduction in viability. Reduced competitiveness. Lower capital formation. Will ease over time. Loss to GDP over period: R200billion
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IMPACT ON EMPLOYMENT Lower GDP results in Failing companies and thus Lower employment levels. Approximately 500 000 job losses (In addition to 1 000 000 in 2009.)
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NATIONAL ENERGY POLICY Prepare Eskom for competition: Restructure Eskom into 2 companies – generation and transmission. Place power stations into a number of companies to facilitate the introduction of competition. Place power stations in private hands. Not implemented.
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OTHER CHALLENGES South Africa’s competitive advantage lost. Profit from current tariffs must not be applied to capex. Appears to be little hope of increased borrowing. Raising tariffs runs counter to poverty alleviation and job creation strategies.
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SOLUTIONS Return to National Energy Policy Eskom to control transmission. Generation to be open to private participation – PPPs, BOT schemes, IPPs. Rationalise distribution industry. Promulgate any necessary legislation and regulations.
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SOLUTIONS Cont. Introduce a charter based on recommendations in White Paper on Energy Policy. Reintroduce Electricity Policy Council. Ring fence tax revenue - low interest loan to Eskom. Treasury to be responsible DSM. New generation introduced at 80c/kWh
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PROPOSALS FOR IMMEDIATE FUTURE (2010/2011) Grant inflation related tariff increase for 2010/11. Work through possibilities with all stakeholders in 2010. Address local authority increases. Postpone introduction of 2c/kWh environmental levy Eliminate import duties on energy efficient consumables and equipment. New generation introduced at 80c/kWh
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STAKEHOLDER SUMMIT All stakeholders. Determine a way forward – medium and long term. Ongoing process. 02 February All invited.
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THANK YOU
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