News Flash
- As a result of a court order issued in July 2022, the National Energy Regulator of South Africa (NERSA) is in the process of consulting on Eskom’s Multi-Year Price Determination (MYPD) 5 revenue application for FY2024 and FY2025.
- In accordance with NERSA MYPD methodology, Eskom is required to provide any updates on changes in conditions and environments that impact various cost elements of the revenue requirements.
- The total revenue as applied for in June 2021 – R335bn (FY 2024) and R365bn (FY 2025) remains the same. Changes are made within the cost items as required with an off- set in the return on assets.
- The price increase being applied for is 32.02% for FY 2024, and the decision will be implemented on 01 April 2023.
The key changes include the following from the previous update (January 2022):
- Increases in Eskom primary energy costs – combination of costs related diesel price increase and volume increase
- Removal of arrear debt related costs – in line with NERSA decision for FY 2023, where other customers do not contribute to gap created by non-paying customers
- Removal of carbon tax related costs – due to announcement by Minister of Finance of impending legislative changes to postpone carbon tax liability to beyond FY 2025
- Increases in independent power producer (IPP) costs – mainly due to increased emergency IPP procurement
- Slight increase in sales volumes
- Further reduction in average energy availability factor for Eskom power stations of 59%
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The following assumptions have not changed from original application
- Operating costs
- Depreciation
- Value of regulatory asset base
- Capital expenditure
The price increase being applied for is 32.02% for FY 2024, and the decision will be implemented on 01 April 2023. The key contributors include:
- Depreciation of 10.67% – due mainly to an incorrect regulatory asset base valuation by NERSA in its FY2023 its decision, (substantially in the generation business),
- Eskom primary energy of 7.85% (of which the majority, 6.09% is due only to increase in diesel and fuel oil prices as well as volume increase in OCGT fuel)
- IPP cost increase of 9.05% (due to further energy being sourced from IPPs including emergency procurement)
The price increase for FY2025 being applied for is 9.74% with IPPs contributing 5.39% to this.
More information on Eskom’s update of the FY 2024 and FY 2025 revenue application can be found on Eskom’s website HERE
Author: Bryan Groenendaal
