Johannesburg - South Africans can expect to pay up to 40% more for electricity next year, with similar hikes over the following two years.
This means the price of electricity could more than double in two to three years.
Eskom has to submit its next application for an electricity tariff increase to the National Energy Regulator (Nersa) by September 30.
This application will be a proposal for fixing the price for the next three years. All indications are that South Africans can expect a huge shock.
Eskom declined to confirm the rumours, but Brian Dames, head of operations at Eskom, says South Africans will have to take a decision in September.
"We will lay our cards on the table and explain the situation to the country. People want nuclear power, independent power producers (IPPs) that Eskom must pay for their power, renewable energy and other projects, but when it comes to paying for these projects there is no answer. South Africans must now help Eskom find a solution."
Nelisiwe Magubane, acting director-general at the Department of Energy, says government remains committed to nuclear power, IPPs and renewable energy.
"The question simply is how to fund the various projects. South Africans must start to understand the costs involved if they want Eskom to proceed with these projects.
"And the one way to finance them is through electricity tariffs."
Eskom's existing capital programme already runs to about R385bn, without any provision being made for projects like nuclear power, renewable energy or IPPs.
Solidarity deputy head Dirk Hermann says we can expect a massive shock.
"The past two increases provided only for operating costs. We now expect Eskom will try to use tariffs to help fund its capital expansion."
In June this year Solidarity said if Eskom has to recover the capital costs of the current construction programme, which at that point amounted to R360bn, from tariffs, prices would have to increase by up to 105%.
In 2008 Eskom asked Nersa for an interim 60% increase and an additional 40% in 2010.
This would double the cost of electricity in two years.
In the past two years Nersa has approved price hikes totalling 58.8%.
Economists are concerned about what will happen next month.
"If the increase that Eskom gets is too high, this could prolong the recession in South Africa," said Economists.co.za economist Mike Schüssler on Friday.
"Rises even within the compass of the past two years will make electricity very expensive and have a huge effect on inflation, in turn affecting interest rates.
"South Africa's economy consists largely of industries dependent on cheap electricity. Expensive power could consequently cramp economic growth."
Nersa needs to consider two factors: the tariff must be kept as low as possible, but at the same time it must be ensured that the quality of the product that Eskom delivers is not impaired.
According to Dames the issues that Eskom needs to consider in its tariff application include the following :
-
Logistical requirements, such as the repair and improvement of national roads. Dames reckons that up to R10bn may be needed to repair the roads that affect Eskom's activities;
-
Nuclear power;
-
Renewable energy projects, such as wind and solar power;
-
IPPs and the money needed to pay these suppliers for the power they generate.
-
The costs of primary energy and wages.
Brian Sechotlho, head of Nersa's department that has to determine tariffs, says Eskom's application will not receive automatic approval.
"Nersa will examine Eskom's information and decide whether the expenditure is necessary or if it is accurate.
"Nersa also needs to first ascertain the effect of any price hike on the economy. A balancing act between what is required and what can be approved then follows," says Sechotlho.
"Remember, on the one hand it is Nersa's job to ensure that Eskom can supply electricity, but at the same time we cannot allow Eskom to make huge profits.
According to Sechotlho, Nersa will need it least four months to make a decision.
"Any increase will come into effect on April 1 next year," he says.
- Sake24.com
For more business news in Afrikaans, go to Sake24.com.