Chamber of Mines comment on Eskom’s application for an interim price increase

In its submission to the National Electricity Regulator of South Africa (NERSA) on Eskom’s application for an interim price increase, made on 2 June 2009, the Chamber of Mines recommended that Eskom and NERSA co-operate to ensure that the interim increase applied for is sufficient to adequately provide for the period until April 2010 and also that the two entities ensure that a funding model and consequent multi-year price determination (MYPD) for the period 2009/2010 to 2011/2012 are finalized in time for implementation by April 2010.

“We have noted that NERSA has indicated that the average price increase of 31.3% approved for Eskom is “from 1 July 2009 to 31 March 2010”. The challenge for the mining sector is that we have a basket of goods and services whose costs are rising at double digit figures in an environment of low commodity prices. This means that a number of mining companies are battling for survival and extra costs add to the burden of the pressures they face in the short term. In addition, these cost pressures have resulted in the Chamber of Mines calling for government to hold in abeyance the introduction of the special 2 center per kilowatt levy until such time that conditions are more conducive. We also hope that a funding model, and consequent multi-year price determination (MYPD) for the period 2009/2010 to 2011/2012, are finalized in time for implementation by April 2010”,  said  Mr Dick Kruger, the Chamber of Mines’ Assistant Adviser: Techno-Economics.

Mr Kruger added that while the Chamber of Mines accepted that there appears to be justification for the requested interim price increase, “the approved 31.3% will add an extra 2 billion rand in costs to the mining industry”. He said until Eskom had developed a detailed funding model of how its capital projects going forward will be funded, it was very difficult to engage on its true funding costs except in terms of basic operational costs.

For any enquiries related to this media statement please contact:

Jabu Maphalala
Deputy Communications Adviser
Chamber of Mines of South Africa