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Yesterday I, along with the Democratic Alliance’s (DA’s) Shadow Minister of Energy, Sej Motau MP, met with Mr Thembani Bukula of the National Energy Regulator of South Africa (NERSA). Following our meeting, NERSA has said that, at this stage, it will not increase consumers’ electricity tariffs to help pay for Eskom’s nuclear build programme.

Mr Bukula is primarily responsible for regulating electricity prices in South Africa. We welcome his commitment that the upcoming nuclear build programme will not affect electricity prices in the next three years; and that NERSA will, at the DA’s urging, consider the possibility of lowering prices in 2012 once the current cycle of price increases has been concluded.

This is excellent news. However, the risk of future price increases still exists.

Eskom is likely to embark on a large-scale nuclear build programme in the near future. It will be exceptionally expensive and, if the current pricing system is implemented, consumers will have to help pay for the construction of the new plants up front. We need to reform the pricing system, known as the Modern Equivalent Asset (MEA) valuation method, in order to ensure that consumers do not have to pay for the construction of new powerplants.

The alternative is to make special agreements with investors to allow the powerplants to pay themselves off over a longer timeframe.

This is a realistic objective, as the cost structure of nuclear powerplants is uniquely suited for such agreements. Initially, massive investments are required to build a nuclear powerplant. But once it is operational, it has comparatively low upkeep costs and can therefore operate very profitably for a long period of time. We should utilise this unique cost structure to protect South Africans against further electricity price increases.

I will therefore initiate a process to develop amendments to the relevant legislation that would allow for the use of an alternative electricity pricing method. At some point in future, NERSA, Eskom, Treasury and the Department of Energy will have to decide how we are going to pay for the necessary expansion of our electricity generating capacity. I want to make sure that we make use of this opportunity to pay for this expansion in a way that doesn’t place an unnecessary burden on South Africans.