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NERSA HEARINGS 20 JANUARY 2010

NERSA HEARINGS 20 JANUARY 2010. Eskom’s Revised Revenue Application MYPD 2010/11 – 2012/13 (MYPD 2) Presented By : Louise Muller & Goosain Abrahams Institute of Municipal Finance Officers. IMFO is the recognised professional body

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NERSA HEARINGS 20 JANUARY 2010

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  1. NERSA HEARINGS20 JANUARY 2010 Eskom’s Revised Revenue Application MYPD 2010/11 – 2012/13 (MYPD 2) Presented By: Louise Muller & Goosain Abrahams Institute of Municipal Finance Officers

  2. IMFO is the recognised professional body for the development and promotion of Municipal Finance Officers and Local Government Finance Established in 1929 – just celebrated 80 Years of Municipal Finance Excellence

  3. Role of IMFO at NERSA Hearing IMFOis presenting from the view of: The financial relationship between the municipality (Electricity Department) and the consumer (reticulation & distribution) and The financial arrangement between municipalities and Eskom (bulk purchases) www.imfo.co.za

  4. Overview of Presentation • General Comments on the Revised Eskom Revenue Application – MYPD 2 • Local Government Finances • Recommendations

  5. General comments on mypd 2

  6. General Comments on MYPD 2 • A robust economic assessment of the impact of the proposed tariff increases on macroeconomic policy objectives would add value and credibility to the Eskom submission • Transparency on efficiency measures introduced and cost saving mechanisms put in place by Eskom

  7. General Comments on MYPD 2(2) • Government as a whole and NERSA, as the National ENERGY Regulator, should be setting the Energy Framework for South Africa • The 3 year MYPD 2 should not be open to change UNLESS to reduce the % increase to below the final level set by NERSA • The next 3-year MYPD submission must not be left to the last minute

  8. Local government finances

  9. Local Government Finances To adequately “protect” service delivery taking place to all: • Local Government must pay Eskom for bulk purchases • Out of the “affordable provision” of electricity • While still providing equitable services • Various different services (including electricity) • Various categories of users www.imfo.co.za

  10. Local Government Finances(2) The CFO (obo Accounting Officer) must budget for realistically expected revenue* Reduced Income – from the current economic climate – affects service delivery Increased Bad Debts & Reduced Sales – due to unemployment – causes a redirection of funding to support increased indigent pool * Section 17(1)(a) of the Municipal Finance Management Act www.imfo.co.za

  11. Local Government Finances(3) IMFOwelcomes the longer term clarity and stability the transparency of any multi-year price determination can bring BUT There is still concern about the level of increase and the ability of the economy to absorb the impact www.imfo.co.za

  12. Local Government Finances(4) IF the economy cannot accommodate all the demands …. No growth or negative economic growth Reduced revenue streams Downward Spiral Potential increase in unemployment Reduced demand for goods and services www.imfo.co.za

  13. Local Government Finances(5) The Economic Impact of 3 increases of 35% have not been adequately explored and quantified Eskom’s submission is silent on the usual “claw-back” applied to local government to accommodate different financial years Certainly the smaller businesses are going to be hardest hit – with significant economic impacts www.imfo.co.za

  14. Recommendations from imfo

  15. IMFO Recommendations LG has limited revenue raising powers – the complex balancing processes related to setting tariffs and taxes must not be undermined and cannot be compromised with a “CLAW-BACK” LG has significant social and developmental responsibility – sufficient INDIGENT SUPPORT must be provided/available to limit any negative impact of increased prices on investment in service delivery www.imfo.co.za

  16. IMFO Recommendations(2) LG has to provide projections to support the “outer years” of the budget process – provide some certainty on the FUTURE TARIFF ADJUSTMENT REQUIREMENTS before end of current MYPD period Smaller local economies are significantly impacted by unexpected changes in prices – don’t accede to requests to open the MYPD unless REDUCING TARIFFS www.imfo.co.za

  17. IMFO Recommendations(3) National Government and NERSA need to set the Energy Policy Direction – boosting ALTERNATIVE / RENEWABLE ENERGY research, development and implementation National Government and NERSA should be considering GENERATION STANDARDS to ensure certainty www.imfo.co.za

  18. THANK YOU

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