HomeIndustry SectorsFinance and PolicyNew electricity price increase to be cut

New electricity price increase to be cut

Johannesburg, South Africa — 09 March 2012  – South Africa’s energy regulator has announced that it has cut the increase in electricity rates for the national power utility Eskom Holdings to 16% for the 2012/13 financial year from a previously approved hike of 25.9%.

Reporting this decision, IOL, Business Report said it had followed Eskom’s application to reduce the hike, after the utility had been asked by the government to ease up on private and industrial consumers who had been hit in recent years with soaring power costs.

Energy-intensive users, including South Africa’s vital mining industry, have long said that the steep increases were making some of their operations unsustainable.

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

The reduction will result in a loss of revenue of US$1.48 billion, the regulator said.

In 2010 Eskom, once one of the world’s lowest-cost electricity producers, was granted three years of 25% annual rises in power tariffs, and was expected to apply for two more similar increases after that.

Only from 2016 were tariffs expected to rise in line with inflation, but President Jacob Zuma said in February he had asked Eskom to seek options to limit the increases to ensure they would not stem economic growth.

“Our concern has been that a further electricity price hike would hurt the consumer significantly and because it’s been such an important part of the growth story in South Africa, we could then see an effective slowdown in our economy,” said Kevin Lings, chief economist at Stanlib.
Eskom has been widely criticised for fuelling inflation.

Inflation breached the central bank’s 3 to 6% target in November, and has been outside its target band since.

Source: IOL/Business Report. For further details click here.