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Electricity Pricing Minerals & Energy Parliamentary Portfolio Committee

Electricity Pricing Minerals & Energy Parliamentary Portfolio Committee. Thembani Bukula - Regulator Member: Electricity. Policies and Drivers. White Paper on Energy Policy of 1998 Cost reflective electricity prices Transparent subsidies Access to affordable electricity services

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Electricity Pricing Minerals & Energy Parliamentary Portfolio Committee

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  1. Electricity Pricing Minerals & Energy Parliamentary Portfolio Committee Thembani Bukula - Regulator Member: Electricity

  2. Policies and Drivers • White Paper on Energy Policy of 1998 • Cost reflective electricity prices • Transparent subsidies • Access to affordable electricity services • National policies • Inflation targeting • 6% growth • Future generation capacity requirements • Funding and financing of debt • Regulatory objectives • Economic efficiency • Reasonable returns • Stable and predictable regulatory framework

  3. Price Regulation method • Rate of return (RoR) Methodology with incentives and penalties • R = Revenue allowed • E = Operating expenses • V = Asset base (property, plant and equipment) • d = Depreciation • w = Working Capital allowance (including Capital Work in Progress - CWIP) • R = Calculated RoR using Weighted Average Cost of Capital (WACC) R = E + (V – d + w) x r

  4. Key inputs

  5. Allowed revenues • The above percentage increases are to be effected on 1 April each year; • The 2006/7 and 2007/8 percentage increases were effected as shown above.

  6. Historic and Long-term Price path

  7. Price curves under 4 scenarios Typical Price Curve/Path

  8. Price curves under 2 scenarios Typical Price Curve/Path

  9. 30 April 2007 Eskom application • Eskom has applied for: • An increase in the Primary Energy costs • The Acceleration Capital Expansion program • An increase on operating expenditure • The Accelerated Demand Side Management (DSM) program • Changes to the Multi-Year Price Determination (MYPD) rules • The effective date of the changes be 1 April 2008

  10. Project Plan 30 April Application received from Eskom Stage 1 Stage 2 Stage 3 Stage 4 • Analysis and evaluation: • Primary energy • CAPEX • OPEX • DSM • 18 July 2007 • Price modeling and recommendations • Model various scenarios and select the best based on regulatory objectives • 31 August 2007 • Stakeholder consultation: • Publication of draft determination (7 – 21 September 2007) • Stakeholder workshop (26 September 2007) and update of draft • Approval by Regulator: • Approve first draft report • Publish for public hearings • Public hearings • Approve final report and determination • December 2007

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