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Eskom wants 16% tariff increase

Oct 22 2012 10:19

Johannesburg - Power utility Eskom said on Monday it has applied for a 16% annual increase in electricity rates over five years to pay for new plants and buy power from independent producers.

The state-owned utility said the increases, from April 2013 to March 2018, would include a 13% annual hike for its own needs and a 3% rise to support the introduction of independent power producers.

Eskom's Chief Executive Brian Dames said the utility would spend R337bn on capital expenditure over the next five years and would need R78bn over the same period to buy power from independent producers.

Eskom is currently building three new plants - Medupi, Kusile and Ingula - with the first power from them at least a year away.

"We have not included any new build expansion beyond Kusile in our tariff application," Dames said at a media briefing ahead of the announcement. The Kusile plant is expected to be commissioned in 2018/19.

Eskom has been struggling to raise the money it needs to build power plants fast enough to avoid a repeat of a 2008 crisis that forced mines to shut for days and cost Africa's biggest economy billions of dollars in lost output.

Energy-intensive users, including the vital mining industry, have long said that the steep increases were making some of their operations unsustainable. Unions have also protested over the impact of above-inflation hikes on everyday South Africans.

Eskom, once one of the world's lowest-cost electricity producers, has been granted annual increases of 25% in recent years.

Earlier this year President Jacob Zuma asked Eskom to seek options to limit the increases to protect economic growth and the last 25% hike was cut to 16%.

The increases could put additional pressure on consumers, already battling with the fallout of the global economic woes, and mining houses that are battling to contain labour unrest that has brought some of their operations to a standstill.

The rand and government bonds showed little immediate reaction to the news.


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