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Eskom to decide on next request for tariff increase

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Johannesburg, South Africa — ESI-AFRICA.COM — 24 January 2012 – South African national power utility Eskom Holdings will decide by the middle of this year on the increase it will request from the National Energy Regulator of SA (Nersa), according to spokeswoman Hillary Joffe.

Two years ago Nersa sanctioned three successive annual increases of about 25% and indicated a possible further 25% increase for 2013/14, followed by 6% the following year.

Eskom’s massive tariff hikes, which have been driving inflation for more than three years, could continue, says Cornelis van der Waal, business unit leader at Frost & Sullivan. He indicated that Eskom was likely to ask for a further increase of 30% when the present determination period ends in the middle of next year. And he said Nersa was likely to agree to a figure between 20 and 25%.

Joffe said that, before submitting a proposal to Nersa, Eskom would consult stakeholders, including the Department of Public Enterprises, the SA Local Government Association (Salga) and the Treasury, as well as labour and business.

Reserve Bank governor Gill Marcus noted last week that electricity inflation was at 17% a year and questioned the need for future hikes “significantly” above overall inflation – which is now just over 6%.

Azar Jammine, the chief economist of Econometrix, said further investment in Eskom’s capacity was essential if it was to continue to generate enough electricity to meet demand. But he added that it could provide for its future capital expenditure with an increase of only 3 to 5 percentage points above the inflation rate. This would put the appropriate increase at between 8 and 10% in the next determination period.