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Eskom asks for 16% tariff increase

Power parastatal Eskom has asked the National Energy Regulator of SA (Nersa) for a total 16% tariff increase over the next five years.
The utility is asking the regulator for 13% for each of the five years for its own needs, plus 3% to support the introduction of Independent Power Producers (IPPs).

The current Multi-Year Price Determination, MYPD 2, comes to an end in March 2013.

Additionally, the power parastatal is proposing that there be a five-year determination for MYPD 3, running from 1 April 2013 to 31 March 2018. The previous determinations, for MYPD 1 and MYPD 2, have been made over a three-year period.

'Eskom's five-year revenue request translates into average electricity price increases of 13% a year for Eskom's own needs, plus 3% to support the introduction of IPPs, giving a total of 16%,' said Eskom chief executive officer Brian Dames said on Monday.

The increase represents a total price increase from the current 61 cents per kilowatt hour in 2012/13 to 128 cents per kilowatt hour in 2017/18. This would include targeted savings in operating and primary energy costs.

'We need increase to cover costs... secondly we have a growing economy and we have to invest in our future,' said Dames, adding that they must also take into account maintenance work, financing for new capacity, participation of IPPs and striking a balance to protect the poor.

Eskom recognised the energy pressures the country faced.

'In this application, we worked hard to strike a balance,' said Dames, who was optimistic that the five-year tariff path would also help give certainty to investors.

'Coal and operation costs have been contained in the application,' he said of the energy source that played a big part of Eskom's input costs.

The request will add up to 'just over a cumulative R1 trillion over five years.'

The application was based on new capacity, up to the completion of the Kusile power plant and also included the Department of Energy's peaker plant (a power plant that generally runs only when there is a high demand) of 1 020 megawatts and the renewable energy IPP programme that caters for a total 3 725 megawatts of renewable capacity.

Public hearings for the application are expected to be held in January 2013.

Additional information: Full MYPD3
News date: 22/10/2012

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