Concern for consumers will inform Eskom tariff increase – Zuma

2012-05-30 14:46

Concern for consumers will inform Eskom’s upcoming electricity tariff increase application, President Jacob Zuma has suggested.

Delivering the presidency budget speech, Zuma pointed out that Eskom reduced its tariff hike for this year from 25.9% to 16% thanks to government’s decision to sacrifice a return of R8 billion.

“I had asked Eskom to explore possibilities in this regard and they responded within a month. This will put more than R8 billion back into the economy during the current year,” he said.

“This approach will also inform Eskom’s next price application – which Eskom is now preparing.”

The electricity utility is due to submit its next tariff application to the National Energy Regulator of SA, Nersa, in July.

But Eskom’s finance chief Paul O’Flaherty noted last week that the R8 billion saving to consumers had been exhausted and that the time had come to move to cost-reflective tariffs, suggesting steeper increases.

He said when Eskom approached Nersa, it hoped to secure an agreement firstly to extend the multi-year price determination period to five years, and secondly to raise tariffs to levels where production costs would be covered.

This was necessary to protect Eskom’s credit rating to enable it to keep borrowing money to complete its infrastructure expansion programme.

O’Flaherty said the price needed to reach 90 cents per kilowatt hour in real terms in five years’ time.
 

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