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Eskom wants tariffs doubled
08/04/2008 21:09 - (SA)
Johannesburg - There is an urgent need to double electricity prices over the next two years, Eskom told the National Electricity Regulator of SA (Nersa) in its recent application for a tariff hike.
"Thereafter, once they are at acceptable economic levels, prices can escalate marginally just above inflation rate," the power utility said its submission released on Tuesday.
"The financial analysis already assumes a R60bn government loan and aims to maintain Eskom's credit rating to enable the company to fund the build programme."
Nersa made an edited version of Eskom's application available on its website. Earlier, it said sections of the submissions would be withheld to protect the company's position in co-sales deals.
In its application Eskom asked for a revision of the 2008/9 electricity prices from 14.2% to a 53% real increase or a
60% nominal increase.
"If the status quo remains, the price increase for 2009/10 will be almost 100%," Eskom said.
It said it fully recognised the proposed tariff hikes could have a negative impact on customers with "undesirable social impacts".
Eskom said it incurred higher primary energy costs in 2006/7 and 2007/8.
Projections for 2008/9 would result in the utility barely breaking even in the current financial year, and it could incur significant loss in the next one.
Eskom said there were a number of options to soften the impact of sharp price increases on the poor.
"A simple and easy way is to implement a method applying a lower price increase to tariffs that should receive protection while increasing the other tariffs."
Earlier, Eskom spokesperson Andrew Etzinger said the application to withhold sections was to protect the company's position in "hard-core" coal sales deals.
Etzinger said that without this stance, the company might have to pay more for coal, pushing the price of electricity up even more.
The company is in negotiations with mining houses to buy about R45m worth of coal - currently at a spot price of about $100 (R770) a ton - compared with around R100 a ton about two years ago, said Etzinger.
"Unfortunately this means that discussions are hard core. We are not talking about one or two percent here or there, so we have to make sure our negotiating position is as strong as possible."
The application document contained details of deals already concluded, he said.
"It is a sound commercial decision not to disclose the information about the concluded contracts that are captured in our application. "It would compromise Eskom's position at the negotiating table," said Etzinger.
This also applied to information on its energy saving campaign.
The company has put several energy saving initiatives out to tender as part of its bid to avoid current power shortages that have led to rostered electricity blackouts.
"We don't want to reveal the negotiating targets because we will find it difficult to manoeuvre... the dynamics are quite serious."
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