Cape Town warns on Eskom hike

It was reacting to the National Energy Regulator's decision to grant the utility a 13.3 percent average increase on top of the 14.2 percent already approved in December last year.

The city's mayoral committee member for trading services, Clive Justus, said "legal clarity" was needed on whether the additional increase would be implementable from the beginning of the financial year starting July 1 2008, or only on July 1 2009.

"If the City is expected to pay the full 27.5 percent increase this financial year, it will cost us over R400m," he said.

"We cannot carry this cost without significant negative impact on our capacity to deliver services, and will therefore need to pass it on to consumers through increased tariffs."

This was something the city did not want to do, as it would put a strain on people already struggling with high interest rates and rising fuel and food prices.

If the full increase was to be pushed through this year, national and provincial governments should say whether they intended to change the law to deal with the Municipal Finance Management Act.

The act did not allow municipalities to increase tariffs during a financial year.

"We can only change tariffs during the annual budgeting process, which includes a mandatory public participation period, and which must be complete by the end of May," Justus said.

"The minister of finance may be able to override the timing of the tariff increase for local government, but it is a complex and lengthy process to review tariffs.

"It will also create severe administrative complications for municipalities."

- Sapa