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LEC TARIFF ADJUSTMENT APPLICATION 2010/11MASERU, 13 APRIL 2010PRESENTATION LAYOUT1. Introduction2. Background on LEC3. Challenges facing LEC4. Key Drivers for tariff adjustment5. Revenue Requirement6. Proposed tariff schedule7. AffordabilityINTRODUCTION LEA act requirement Composite license Fifth submission since regulationBACKGROUND LEC is vertically integrated with a small generation , transmission and distribution Bulk suppliers; Muela, ESKOM and EDM 100% state owned company Five divisions; Engineering, Commercial, Corporate functions, Finance and Corporate services Governed by Board of DirectorsCHALLENGES REGIONAL POWER SHORTAGE UNDERINVESTMENT IN THE DISTRIBUTION NETWORK POOR SETTLEMENT PLANNING SHORTAGE OF CAPITAL LOW CONSUMING CUSTOMERS HIGH STAFF TURNOVER OVER RELIANCE ON IMPORTSKEY DRIVERS FOR TARIFF ESKOM TARIFF ADJUSTMENT (24.8%) EDM INCREASE (12%) INCREASE IN OPERATIONAL COSTS-INFLATION-DEPRECIATION-GROWTH DYNAMICREVENUE REQUIREMENT Cost of Sales M157 m Operations and Maintenance M246 m Return on assetsM 19 m Total M422 mRECOMMENDATION LEC recommends that Board of Lesotho Electricity Authority approves a revenue requirement of M422 million.PROPOSED TARIFF INCREASEPROPOSED MAXIMUM DEMAND CHARGESAFFORDABILITY AS PER HBS HOUSEHOLD SPENT M186 ON POWER AND RENT MOSTLY RENT IS M100 ASSUME M86 TO BE SPENT ON POWER 110 ELECTRICITY UNITS WHICH ARE ENOUGH FOR COOKING AND LIGHTING FOR A MONTH COMPARATIVELY GAS IS 16% MORE EXPENSIVE THAN ELECTRICITY PER KWH.
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