The National Energy Regulator of South Africa (Nersa) has announced the dates and venues for the upcoming public hearings on Eskom’s application for the third multiyear price determination (MYPD3).
The State-owned utility has applied for average yearly price increases of 16% for the five years from April 1, 2013 to March 31, 2018.
The public hearings will be conducted in all provinces from January 15 to January 31, 2013, and Nersa is expected to make a determination on February 28.
The first hearing will be held in Cape Town on January 15, followed by Port Elizabeth (January 16), Durban (January 17), Bloemfontein (January 21), Kimberley (January 22), Potchefstroom (January 23), Nelspruit (January 25), Polokwane (January 29) and Midrand on January 30 and 31.
The hearings are likely to be heavily contested, with a number of organisations having already raised objections to another round of price increases that would be well above the rate of inflation.
However, Eskom has moved to defend the application for allowable cumulative revenue of nearly R1.1-trillion over the five-year period, saying that 13% of the increase will cater for its own operational and expansion needs, while the additional 3% will support the introduction of independent power producers (IPPs).
The bulk of the revenue requirement, Eskom says, relates to anticipated primary energy costs of R355-billion over the period, most of which relates to the purchase of coal. The balance is attributed to operating costs (R270-billion), integrated demand management (R13-billion), depreciation (R185-billion), IPPs (R78-billion) and a return on assets request of R187-billion.
But Business Unity South Africa has already indicated that it will show the 16% cannot be justified and that its calculations show that yearly increases of 10.8% would still support a transition to cost-reflective tariffs.
Others have been even more assertive, warning that the surge in prices over the past five years is placing untenable pressure on South Africa’s electricity-intensive manufacturing and mining sectors.
The utility has indicated that, if granted, the increases would raise the price of electricity from 61c/kWh currently to a nominal 128c/kWh by 2017/18, or to 96c/kWh real at the conclusion of the MYPD3 period.
The Manufacturing Circle has argued that the competitiveness of the manufacturing industry has already been undermined by a 170% increase in electricity prices over the past decade and that further increases will undermine South Africa’s reindustrialisation ambitions.
The Energy Intensive User Group has warned that certain electricity-heavy companies, many of which beneficiate raw material using electricity, are approaching a competitiveness “tipping point”.
A further cumulative nominal increase of 110% over the upcoming five-year period would add further pressure, particularly if municipal mark-up were not checked.
Nersa called on stakeholders to attend and to make oral representations at the public hearings.