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Rand Water TARIFF CONSULTATION PROCESS 10 TH OCTOBER 2011 1.

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Presentation on theme: "Rand Water TARIFF CONSULTATION PROCESS 10 TH OCTOBER 2011 1."— Presentation transcript:

1 Rand Water TARIFF CONSULTATION PROCESS 10 TH OCTOBER

2 2 DWA / TCTA raw water pricing6 th Oct 2011 Customer consultation10 th Oct 2011 Customer notification30 th Nov 2011 Submission to DWA 10 th Dec 2011 Parliamentary approval15 th Mar 2012 Customer Notification of Parliamentary Approval15 th April 2012 PROCESS AND IMPORTANT TIMELINES

3 3 DRIVERS Municipal Finance Management Act: 6 months advance notice National Treasury & SALGA: 40 days for consideration Bulk Water Supply Contract: prior consultation and information sharing

4 4 Rationale for tariff increment Rand Water has followed a consistent rationale for increasing its tariff over the years. This rationale has been based on assessing the Rand Water internal rate of inflation. This is a projection of the expected increase in total costs. A breakdown of the total costs and their overall expected rate of price increase is then proposed as the proposed tariff increment.

5 5 Raw Water Tariff Increment In previous years, lower tariff increments have been followed by high tariff increments, as shown above. This makes the exercise of multi-year tariffs difficult to achieve.

6 6 Consumer Price Index (CPI) Adjustment - Phase 1 This covers the outstanding debt of Phase 1 of the Lesotho Highlands Water Project (LHWP). This increased by 4.60 per cent (8.95 cents / m 3 ). This increase coincides with the May 2011 CPI figure, as formulated by the TCTA model. Phase 2 – Lesotho Highlands Water Project (LHWP) This relates to the second phase of the LHWP. Therefore, the tariff overlaps the two phases. Trans – Caledonia Tunnel Authority (TCTA)

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9 9 Energy Costs Rand Water has to take into consideration tariff increments of 24.8 per cent : per cent: per cent :2013 This is a huge imposition on Rand Water input costs which many customers struggle to understand. Rand Water receives its energy from Eskom as well as three other municipalities. Therefore Rand Water still has to pay an additional energy tariff increment from the three municipalities over and above the 26.1 per cent energy tariff increment. A historical trend analysis shows that these municipalities have increased an additional 12.5 per cent over the tariff imposed by Eskom. In addition, this is an increment to an already higher tariff. Eskom - R per kWh Range of municipal tariffs - R R per kWh oEkurhuleni ~ R % oCity Power – Joburg ~ R % oEmfuleni ~ R %

10 10 Energy management Energy Efficiency improvement Cogeneration Other Security of supply Tariff minimization Energy Cost optimization

11 11 Chemical Costs An important component of chemical costs is that some of the chemicals are imported. Therefore, it is important to take note of the current weakening of the Rand. Taking into consideration the rising CPI, chemical costs are expected to increase by 12.5 per cent.

12 12 Chemical costs analysis Water volume increases Chemical prices increases Treatment option (organic coagulants or hydrated lime and activated silica) Required chemical dosage increased Turbidity deteriorated over the period

13 Revenue increased driven by a 4% increase in volumes compared to 2009/10. Normal growth in volumes of 2% projected going forward. 13 for the year ended 30 June Actual 2009/10 Budget 2010/11 Budget 2011/12 Income statement Revenue Cost of Sales (2 435)(2 702)(3 031) Gross Profit Financial Performance

14 14 for the year ended 30 June Actual 2009/10 Budget 2010/11 Budget 2011/12 Income statement Gross Profit Other operating income Staff costs(934) (978)(1 093) Energy(688) (900)(1 164) Chemicals(170) (244)(294) Other operating expenses(289) (347)(328) EBITDA Depreciation and amortisation(167) (178)(192) Income from operations Financial Performance

15 15 Funding Sources for Capex Capex funding released from the redemption reserve of RW02 bond which was switched to RW21 amounting to R468m.

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17 17 Thank You

18 18 Cost Comparison

19 19 Energy Costs Rand Water has to take into consideration tariff increments of 24.8 per cent : per cent: per cent :2013 This is a huge imposition on Rand Water input costs which many customers struggle to understand. Rand Water receives its energy from Eskom as well as three other municipalities. Therefore Rand Water still has to pay an additional energy tariff increment from the three municipalities over and above the 26.1 per cent energy tariff increment. A historical trend analysis shows that these municipalities have increased an additional 12.5 per cent over the tariff imposed by Eskom. In addition, this is an increment to an already higher tariff. Eskom - R per kWh Range of municipal tariffs - R R per kWh


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