HomeIndustry SectorsGenerationRegulatory support for Eskom tariff increases

Regulatory support for Eskom tariff increases

8 November 2007 – According to the National Energy Regulator of SA, Eskom’s application for an 18% increase in 2008 and a further 17% in 2009/10 was "justified" and "valid".

Citing escalating costs for coal, transport and equipment, the regulator said price increases would help the power utility by mitigating the cost of fuel, water and the introduction of more expensive energy sources in the future.

Eskom’s revised capital expenditure programme, up to US$21 billion from US$12 billion is said to have influenced the regulators change of heart (price increases previously awarded for 2008 and 2009/10 were 5.9% and 6.2% respectively).

Eskom says tariff increases are needed to fund new generation capacity.

"The changes in Eskom’s business parameters are such that they have increased its short-term and long-term costs substantially," the regulator said.

"To enable the financing of Eskom’s business, (our) analysis shows it will be necessary for customers to start to meet the long-term costs from 2008-09 as well as the more immediate costs, unless there is some form of recapitalisation (by the government)."

However, Tito Mboweni, governor of the Reserve Bank has warned that increases of this magnitude could effect inflation.

The regulator has said that the final decision will be made in December, but that workshops would be held nationwide during November, with a public hearing on 22 November in Pretoria.

Failure to raise tariffs would threaten Eskom’s ability to finance its expansion programme, the regulator said.