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'Power price has to double soon'
25/03/2008 16:41 - (SA)
Cape Town - Alec Erwin, the Public Enterprises minister, warned MPs that within two or three years the price of electricity
will have to double.
Answering questions in the National Council of Provinces on Tuesday he asked members: "Should we not do it in bigger chunks and quickly? It makes sense to do it that way."
The minister explained to MPs that the application for a renewed price increase allowed a certain rate of return on assets to generate sufficient surplus for Eskom to finance half of its build programme, but it was mainly to deal with the "pass-through costs" ? those costs that the regulator
allows to compensate for rapid and unforeseen increases in raw materials such as coal and diesel.
"It will be better for everybody to take those costs now rather than waiting for 2009, and probably have a 100% increase then," Erwin said. "The Eskom situation would have deteriorated so badly it would not be able to raise capital. It would have to stop its build programme. And if we were to stop Eskom's build programme by 2010 we would have a serious energy crisis, much more serious than we have now."
The minister said that if the pass-through price increases were delayed until the next cycle, "we are going to have a very big price increase. We are going to have the cost of the coal and the diesel which would have occurred right through two financial years".
He added that Eskom was probably projected for a loss right now.
Erwin told MPs that the proposal that had been made to the regulator was structured in such a way that poor households would pay "a minimal increase".
"We are also finding ways to ensure that smaller business, including small farmers, that we reduce the burden on them as well," he said
Questioned by Juanita Terreblanche of the Democratic Alliance about the bonuses being paid to Eskom's managers, he said that these related to previous years' performances, and that it would be wrong to break their contracts by not paying them.
He said it was very unlikely that the "gatekeepers" would allow bonuses to be paid for this year's performances.
- I-Net Bridge (Business)
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