Aug 01, 2012
Nersa looking to cost reflective price by 2018Back
Eskom|Hitachi|Energy|Energy Regulator|Finance Ministry|Reflective Electricity Prices|Flaherty|Hilary Joffe|Infrastructure|Lance Greyling|Thembani Bukula
Nersa's Thembani Bukula said the regulator would receive Eskom's medium term tariff application, called MYPD3, by the end of the month, and then hold consultations for two months before deciding the increase regime for the next five years.
"We have done our own calculation of what the price increase needs to be, to be cost-reflective. Our own model gives us an impression but we need certain inputs from industry," he said on the sidelines of a briefing to Parliament's portfolio committee on energy.
The consultation period will end on November 30. Nersa will then hold public hearings on the tariff increases in January, before announcing a decision at the end of February next year, he told the committee.
Eskom's spokeswoman Hilary Joffe confirmed that Eskom received extensive comment on its application from National Treasury and the SA Local Government Association (Salga) on Tuesday.
Asked whether the finance ministry recommended Eskom adjusts its application, Joffe declined to comment. Eskom has also been tight-lipped on reports that leaked documents reveal it is demanding annual increases of between 14.6% and 19%.
Eskom applied for increases of 45% in its MYPD2 submission for 2009 to 2012, and treasury recommended that this be downscaled to 35%.
Nersa awarded increases of roughly 31% annually but this was adjusted to 16% in the past two years, after government waived dividends of some R7.7-billion.
Bukula noted that this reprieve to the consumer moved back the goalposts on achieving tariff reflectivity, hence the new target of 2018.
"Ultimately the goal is inflation related increases, but we have to take a detour of becoming cost-reflective to cover the cost of the plants and to deal with the fact that we have old infrastructure."
He added that in terms of taxpayers footing the bill for capital expansion, he believed "we are over the hill now and going downwards".
Responding to a question from opposition MP Lance Greyling, Bukula said Nersa had leverage in making sure Eskom went about expanding infrastructure in a cost efficient way.
He confirmed that Nersa was looking into complaints about problems with the utility's contract with Hitachi to supply boilers for its new Medupi and Kusile plants, and would fine Eskom if it were at fault.
"On penalties for Hitachi, the jury is still out. All of these things are going to be out in the open in the regulator's account."
The regulator would also take into account the re-evaluation of Eskom's assets, which could differ from the assessment it submitted in its MYPD2 application.
Bukula also reiterated Nersa's commitment to keeping Eskom's credit rating stable.
In May, Eskom's finance director Paul O'Flaherty told MPs the utility needed tariffs to reach a price level of 90c per kilowatt hour in real terms, in five years, to complete its R385-billion build programme and pay off its debt.
Edited by: SapaComment Guidelines (150 word limit)
Other Electricity News
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
JSE-listed real estate investment trust (REIT) Rebosis Property Fund achieved a distribution growth of 8.1% to 99.45c per linked unit in the financial year ended August 31, despite volatile market conditions.
A low-cost, inflatable incubator won this year’s international James Dyson design award, which aims to encourage and inspire the next generation of design engineers.
The World Bank released its ‘Doing Business 2015: Going Beyond Efficiency’ report last month and ranked South Africa 43 out of 189 global economies for its ease of doing business, with Singapore topping the rankings.
Air Products South Africa officially launched its R300-million Eastern Cape air- separation unit (ASU), at its new manufacturing facility in the Coega Industrial Development Zone (IDZ), earlier this month. It is the second facility that Air Products launched in South...
BMW South Africa (SA) has signed a power purchasing agreement with energy company Bio2Watt. The offtake partnership will bring renewable energy to the carmaker’s Rosslyn plant, north of Pretoria.