Electricity price hike the only way – Eskom

Economic models show it is better and fairer for tariffs – not taxes – to pay for electricity, the National Energy Regulator of SA (Nersa) has heard.

If electricity was sold at the “right price”, it would be used more efficiently, so less would have to be invested in new generating capacity, Eskom CEO Brian Dames and chief financial officer Paul O’Flaherty said in a joint presentation at public hearings called by Nersa.

The energy regulator is currently holding public hearings on Eskom’s proposed revenue application multiyear price determination 2013/14, otherwise known as MYPD 3.

Eskom has asked for a 16% increase in electricity prices each year for the next five years.

This would take the price of electricity from 61 cents a kilowatt hour in 2012/13 to 128 cents a kWh in 2017/18 – more than doubling the price over five years.

The current multiyear price determination, MYPD2, ends on March 31 2013.

In contrast to the MYPD1 and MYPD2, which both spanned three years, Eskom is now proposing a five-year determination for MYPD3 to ensure a predictable, longer-term price structure.

The two executives told the Nersa hearings the application supported investment by independent power producers and by Eskom.

An average annual increase of 13% was intended to meet Eskom’s needs over five years, plus 3% to introduce new independent power producers – a total of 16% a year.

The application was based on new capacity, which Eskom was committed to build, up to the substantial completion of the Kusile power station project.

“We have included a long-term price path to implement new capacity beyond Kusile, but this is not included in our revenue requirement for the five years,” they said.

- Sapa