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Eskom costs may hit R1 trillion
19/05/2008 14:01 - (SA)
Johannesburg - Eskom needs to raise R55.7bn, through higher tariffs, global growth consulting company Frost & Sullivan reported on Monday.
Supporting the acknowledgement from last week's Energy Summit that electricity prices in South Africa must keep increasing if the current power problems are to be addressed, F&S said Eskom needed to fund at least 15% of what it needs for its capital expenditure programme through additional incomes.
However, F&S energy industry analyst Jeannot Boussougouth said raising tariffs would never be popular or simple, regardless of how it was done.
"Given the social implications of such measures, the National Electricity Regulator of South Africa (Nersa) has been reluctant to increase electricity tariffs to a cost-reflective level," said Boussougouth.
"This view is backed by the Reserve Bank because of the likely inflationary effects. However, if all stakeholders are serious about tackling the electricity crisis, the increase of electricity tariffs must be pursued," he added.
South African power utility Eskom has asked Nersa to review its decision to allow it to increase tariffs by only 14.2%.
Eskom has asked for prices to be increased by at least 53% for 2008/09 as it battles to balance rising input costs with burgeoning demand.
But the utility was told by the ruling party, labour and community forums at the National Energy Summit last week that any increase in electricity prices must be smoothed over five years.
F&S said while it agreed prices should be increased, there was no need for South Africa to try to raise prices to the level of the most expensive electricity suppliers in the world.
"What is required is a cost-reflective tariff that will allow Eskom, and potentially independent power producers as well, to fund new projects," the consultancy said.
Eskom is spending about R300bn over the next five years on
expanding capacity, but this amount may swell with government plans to accelerate some projects in an attempt to alleviate South Africa's current power crisis with final expansion programme costs estimated at more than R1 trillion.
The utility's New Build Programme will see some 20 000MW of additional capacity brought online by 2025.
"The South African electricity crisis could trigger an across-the-board deterioration in confidence for the country if the right measures are not implemented," Boussougouth noted.
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