Eskom: hike request known soon

Johannesburg - An announcement about the most painful adjustment to South Africa's post-apartheid economy, competitive power rates, is expected on Tuesday when Eskom makes known its mid-term rate application to energy regulator Nersa.

Eskom chairperson Bobby Godsell gave an indication of the coming increase on Friday, when he compared Eskom's existing kilowatt hour rate of 33c with those of between 75c and 120c seen in applications for licences by independent electricity producers.

"I see the applications from private power producers, though I'd prefer not to. I believe Eskom should have nothing to do with the licensing of private electricity producers," Godsell said.

Eskom rates would therefore have to rise by between 127% and 264% before private power producers in South Africa could be viable - a move that would have serious consequences for growth prospects in the economy and could perhaps mean the end of electricity-intensive industries like the manufacture of ferrochrome and aluminium.

Godsell said that a "systemic change" in the country's rates system was needed to ensure future power provision.

"That's the only alternative for getting away from the ridiculous situation of having the cheapest electricity, but having to admit our supply has dried up."

Proposed scenarios

Eskom has proposed several rate scenarios in the application that it submitted to Nersa, treasury and the South African Local Government Association (Salga) last week.

The proposals were submitted to the government over the weekend and will be announced on Tuesday by Eskom CEO Jacob Maroga.

One of the proposed scenarios is apparently that rates should be increased by 146% next year, so that 2011 and 2012 increases can be smaller.

That would make it possible to sign electricity buying contracts with private power producers immediately, so that they can start building more power stations.

Several private electricity generation projects have been up in the air for a year already, because of the uncertainty over the electricity rate structure.

"As things stand now, Eskom must make up the difference in rates. It's therefore no surprise that no private producers are up and running yet," Godsell said at a breakfast meeting of the South African Federation of Steel and Engineering Industries (Seifsa).

Eskom has to make up a deficit of R80bn on its capital expenditure programme and will have to make provision for this in its rates too, as well as for more free electricity to poor households to ease the effect of the rate increases on them.

- Sake24.com

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