HomeRegional NewsSouthern AfricaCabinet change of heart over Eskom price increase request

Cabinet change of heart over Eskom price increase request

20 May 2008 – Government support for Eskom’s dramatic 53% price increase seems to be waning, and talk has now shifted toward a cash injection for Eskom, thereby allowing smaller price hikes over the next five years. The consensus amongst all stakeholders is that an immediate price hike would do irreparable harm to the economy and significantly affect inflation and interest rates. The final decision with regards the price hike will rest with the National Energy Regulator (NERSA) but government’s opinion is unlikely to go unconsidered when the final deliberations are made.

ElectricityEskom has been delivered another blow by the reversal of its load shedding policy, when it announced at the beginning of May that load shedding was unlikely due to energy savings achieved. This has now been abandoned due to strain on infrastructure.

Last week, government spokesman Themba Maseko indicated that government had revised its earlier position on the Eskom price increase, with “the emerging consensus being that Eskom should receive an injection of funds from the state.”

Eskom has warned it will loose up to US$1.5 billion this financial year if the request for a price increase is turned down.

Eskom has warned it could suffer a loss of up to R10bn in this financial year if Nersa turned down its request. Cabinet has also adopted a new electricity pricing policy, which Maseko says will strive to ensure "an investor friendly pricing structure that promotes efficient cost recovery measures and a reasonable return on investment".