20 August 2007

The National Energy Regulator (Nersa) received an application from Eskom on 30 April 2007 to consider changing some of the current rules under which Eskom’s electricity prices are determined in the Multi-Year Price Determination (MYPD). Eskom provided more information in support of its application to Nersa on 18 July 2007 which included among others the quantification of its risks.

The rule changes for 2008/09 applied for by Eskom are:

* the pass-through of the primary energy costs incurred by Eskom
* the allowance of compensation for the accelerated and increased capital expenditure by Eskom
* the conditions for re-opening of the price determination.

If the application for rule changes for 2008/09 is accepted by the Energy Regulator, this would have revenue implications for Eskom and there will be a need for Nersa to adjust electricity prices starting from 1 April 2008.

The information that Eskom has submitted will be taken into account in Nersa’s evaluation of the application. Eskom’s Annual Report for 2006/07 recently released predicts that the electricity prices will increase by 18% in 2008 and 17% in 2009. The Energy Regulator allowed Eskom a multi-year price determination for three years which was 5,1% for 2005/6, 5,9% for 2006/07 and 6,2% for 2008/09.

The Energy Regulator has not made any decision with regard to changing of price increase for 2008 and 2009 since it is still considering the application and the outcome of the modelling that is currently taking place.

The Energy Regulator would like to re-iterate its position that it is not negotiating with Eskom as it has been widely reported in the media about the application for review of change rule that would affect the tariff increase as predicted to 18% in 2008 and 17% in 2009 by Eskom. The Energy Regulator will follow a vigorous consultation process which will allow the public and the affected stakeholders to make comments before a final decision is made by the Energy Regulator. In this regard, the Energy Regulator has approved a schedule that will allow the public to participate in the process leading to the decision regarding Eskom’s application which is summarised as follows:

* publication of rule change (if any) and draft determination (if necessary) on 17 October 2007
* public hearing on 22 November 2007
* approval of the final report and determination is made on 20 December 2007.

The Energy Regulator is encouraging all stakeholders and the public to take into cognisance the above-mentioned deadlines and fully participate in the process that will assist the Energy Regulator in its core mandate of balancing the interests of the customers and the regulated utilities.

Statement issued by the Department of Minerals and Energy, South Africa.