An evaluation, investigation and recording of the design and implementation of the cost-based tariff design training programme to align Eskom distribution for EDI restructuring.

Abstract

The South African Electricity Supply Industry (ESI) has been, over much of the last century, dominated by Eskom, a large and powerful state-owned, vertically-integrated monopoly. It produces 97 % of the electricity generated in the country and that represents almost 60% of the electricity generated on the entire continent of Africa. However, recent studies of the company's performance have lead to a decision to reorganize the industry due to the realization of poor investment decisions made in the past, which resulted in massive costs to the company. The distribution business in the industry has been hugely affected by these past inconsistencies, thus in line with global trends and escalating problems, the South African Cabinet approved the restructuring of the Electricity Distribution Industry (EDI) in nineteen ninety eight, ahead of restructuring of the entire Electricity Supply Industry (ESI). There is currently a large number of municipalities plus Eskom in South Africa supplying electricity to consumers - leading to disparities in tariffs and prices. To resolve these issues, has accepted a proposal that Eskom and municipalities amalgamate to form six independent, financially viable Regional Electricity Distributors (REDs). It is no secret that electricity in South Africa has consistently been amongst the cheapest in the world. This is credited to two principles; an abundant reserve of cheap coal resulting in economical production of electricity; and, the fact that there is still a number of citizens with no access to electricity. This is a concern for the Electricity Pricing sector now faced with the task to rationalise the price inequalities in the distribution business to be fair and equitable to all customers. The Eskom Distribution Electricity Pricing team is currently undertaking the Cost-based Tariff Design project to address tariff objectives such as; cost reflectivity and transparency. The Competency Building phase within this project affords potential future RED staff members opportunities to learn a broad overview about designing tariffs. This dissertation will report on, dissect, analyze and discuss results, and recommend the probable future of the project in light of the dynamic nature of the developments in the EDI restructuring process.