Eskom tariff hikes announced

Cape Town - The National Energy Regulator of SA (Nersa) on Thursday announced that Eskom can hike its tariffs 8% over five years, half of the 16% the power utility proposed.

Eskom had asked for a 16% increase in electricity prices in each of the next five years, which would more than double the price, taking it from 61 cents a kilowatt hour in 2012/13, to 128c a kWh in 2017/18. 

"The decision of the energy regulator is based on facts," Nersa chairperson Cecilia Khuzwayo said.

She added it was important to note that Eskom's application for a 16% hike was made with the backdrop of "continuing global economic recession".

The parastatal previously said it needs the increase to cover the costs of supplying the electricity needed to power South Africa and invest in infrastructure. 

The proposed increase was met with criticism from political parties, unions, civil society, businesses, and South Africans in general.

Likely to defer interest rate hike

In a commentary, Nomura emerging markets economist Peter Attard Montalto said: "This is bad news for Eskom's balance sheet and for issuance where the difference will have to be made up, and hence why we did not pay much credence to the lower issuance forecasts yesterday (Wednesday) from state-owned enterprises in the budget.

"The government is asking Eskom to accelerate its infrastructure programme and take the bulk of that programme on its shoulders, whilst not allowing it to raise funds through user-pay-principle to fund it.

"This is good news for inflation though, and will shave some 0.16pp off our forecast from July this year which means inflation may well only be around 5.0% at year end - hence no need to hike rates this year at all, nor well into the middle of next year."