Chairperson, what South Africa needs, and as soon as possible, hon Minister, is enough power at as low a price as possible. Last week the Minister of Public Enterprises, Mr Gigaba, said:
Cabinet is set on embarking on a nuclear plan with Eskom at the helm.
This was also alluded to by hon members in today's debate, and the Minister endorsed that view.
This endorses the Integrated Resource Plan 2010 in terms of the percentage allocation for nuclear in our energy mix. But, Minister, that is on the one hand, but the other side of the coin is that the study towards a new power plan commissioned by the National Planning Commission indicates that we should consider delaying the proposed expansion of nuclear power stations. This is a bit of a contradiction. Are we not aligning ourselves to the National Development Plan, then?
The plan indicates that more nuclear power would not be needed before at least 2029, and perhaps not until 2040. South Africa's Integrated Resource Plan 2010 is, therefore, out of date and could lead to the building of unnecessary power stations at great cost and higher electricity prices.
The DA has called repeatedly for an urgent review of the country's 20-year energy plan. A continuation of the current plan will result in South Africa, and I am quoting the hon Greyling - who comes from a very good background and a very good family - when he said that South Africa would be left with "surplus, stranded, expensive" power plants.
Hon Minister, government has already made an investment in the long overdue Medupi - and everybody knows the concerns with regard to finishing Medupi - and we need to finish it as soon as possible to get security of supply. We also need to finish the Kusile and Ingula power stations, coupled with lower demand for electricity and progress in renewable energy, which endorses the findings of the study by the National Planning Commission.
The IRP is meant to be revised every two years, and is due for revision this month, but the Department of Energy said that it would not be done until the Integrated Energy Plan has been finalised.
Chairperson, acknowledging that the IRP is out of date, we now need clarity with regard to our energy mix, which we really need, seriously, and the security of supply, as hon Smalle has indicated, as well as confidence in the Eskom pricing applications.
Now, with regard to the pricing applications, because I think that is very important, in the Multi-Year Price Determination 3, MYPD 3, Eskom has in effect made two applications to the National Energy Regulator of South Africa, Nersa - I hope that Cabinet is aware of this. The first application was a formal application through to 2018 and the completion of the current new Bill. That is the current situation. In that application the tariff rose by 16% from 61c per kWh to 128c per kWh.
We were painfully aware of the negative impact in terms of the economy with regard to that, and the position of consumers and businesses, and we all agree. I think there is general consensus with regard to that, Minister. Our position was that Eskom should only be granted an inflation-related tariff. And I think there was also some consensus, and positive remarks in this regard.
In our presentation to Nersa, the DA took particular issue with two components of the Eskom pricing applications - and the chairperson was present when I made my presentations to Nersa in Cape Town - the return on equity and the return for the shareholder. Government was scaled down, and we are very grateful for that. In terms of the depreciation, that was also scaled down because of the cost of replacement of assets. We acknowledge that Nersa cut them down to size because it was completely inflated.
The DA argued that the consequences of revising the price formula and extending the timeframes should be seriously considered and we, in fact, made three presentations to the regulator.
The regulator pulled no punches in its decision and I think they also endorsed our views. The price then came down from a 16% to an 8% per a year for five years ... [Interjections.] Yes, our views; it could be yours too, Minister, if that is your view ... [Laughter.] ... explaining that Eskom could be more efficient. It could no longer pass the cost of electricity buyback programmes on to the consumer; I think that those were all our views. It also did not need a higher credit rating than the government because a state-owned entity is part of government. We really commend Nersa for that decision in this regard.
Now with regard to another problem, which I think that is what we need to discuss today and I hope the time will allow us to do so. The second application of the Electricity Supply Commission, Eskom, to Nersa is extremely problematic and is still applicable. It is an Integrated Resource Plan application, which takes into account the expansion of the power sector beyond Multi-Year Price Determination 3, and it includes the building of six nuclear power stations totalling 9 600 megawatts.
Just take note, in this case Eskom will say they need another 20% increase from 2013 to 2017. That is in a second application, which is a reality. But simply that will take us back from a reduction in price from 16% to 8% and then back to 20% and then to 24%, and after the MYPD 3 it would then escalate further to a further 9% increase year-on-year.
Chairperson, I ask you, can we afford this? I think this is a serious issue that Cabinet needs to consider. The Electricity Supply Commission argued that the government must take decisions on expansion beyond the current new Bill. If Nersa considers only the formal application, Eskom says it will have to ask for more when those new decisions we are talking about are made.
This will have profoundly negative implications for our struggling economy. It will lead to stagflation - we all know what stagflation is. It is high inflation and very low growth. We are caught in that trap. It was also mentioned by the Governor of the Reserve Bank and it is hugely problematic. Minister, I think those are issues, and I would be glad if you could give me an invitation, and perhaps we ... [Applause.] [Laughter.]
What needs to be done, Madam Minister, is not to talk about the budget right now, but to talk about the Eskom price applications. And it needs to be discussed as soon as possible, namely the issue of enough power at the lowest price possible.
The Integrated Resource Plan, Madam Minister, is entirely out of date at this point and has caused justified uncertainty regarding the sound management of issues relating to our energy mix and energy pricing. I think, Madam Minister, the energy team has a long way to go. I think what we need to do is revise the IRP so that we can have clarity in terms of supply, pricing, and also the direction that we need to go. Thank you very much. [Applause.]