10 April 2008 – It has been revealed that Eskom will be seeking a 43% increase for the next two years, on top of the 53% increase it has just applied for.

Thembani

Thembani Bukula

Eskom’s request for a 53% price increase has been met with resistance and the Congress of South African Trade Unions (Cosatu) has threatened mass action over rising costs.

However, the National Energy Regulator of SA (NERSA) says it has not given Eskom a blank cheque for future price increases.

"Eskom must find ways of ensuring that there are no further hikes other than those that are really, really outside anyone’s control," said NERSA’s Thembani Bukula.

The true cost of the price increase, once inflation has been taken into account, is 60% and Cosatu has applied a notice for a protected strike action over the price increases.

"Eskom recommends the implementation of a 53 percent increase and 43 percent real price increases in 2008/9 and 2009/10 respectively," says a revised version of Eskom’s application.

"If the status quo remains, the price increase for 2009/10 will be almost 100 percent. Our analysis reflects an urgent need to double prices over the next two years and thereafter, once they are at acceptable economic levels, prices can escalate marginally above inflation," Eskom says in the report.

However, it has been reported that if the price increase is allowed, Eskom’s after tax profit will increase to R12.7 billion (US$1.8 billion), up from its 2007 profit of R6.5 billion (US$930 million).

In its submission, Eskom claims the increase is needed to "assure" credit rating agencies and funders for it’s capital expansion programme. Eskom also said the 53% increase would be used to cover the increased costs of coal and fuel.

NERSA is investigating Eskom’s application, including visiting coal suppliers.

"One of the questions we are asking in the consultation paper is what are the views of the public insofar as the commitment we will get from Eskom as to its need for future price increases?" Bukula said.

Andrew Etzinger, Eskom spokesperson said the submission to NERSA dealt in detail with "possible scenarios" and what they could mean for future pricing structures.

NERSA’s decision regarding Eskom’s increase request will be made available on June 6.