New tariff hikes are on the cards as Cabinet has named Eskom as the owner and operator of planned nuclear power stations.
Cabinet has named state power utility Eskom, the owner and operator of the six nuclear power stations, that state plans to build, as part of efforts to meet South Africa's electricity shortage.
This is the clearest indication that the government is set to follow through on its nuclear procurement programme despite serious concerns over the financial implications for the country.
The announcement goes against the recommendation of the National Development Plan, the 30-year vision for the country drawn up by the national planning commission.
The commission warned that an "in-depth investigation into the financial viability of nuclear energy was vital" and recommended that government reassess the desirability of such as programme.
Updated cost estimates for the nuclear build programme were not immediately available, however the Mail & Guardian has previously reported that it could be well over R1-trillion.
The announcement was made by Minister in the Presidency Collins Chabane at a post-Cabinet briefing on Thursday.
Cabinet endorsed a "phased decision-making approach for implementation of the nuclear programme", Chabane said, along with the "designation of Eskom as the owner-operator as per the Nuclear Energy Policy of 2008".
The decision may have substantial implications for Eskom's most recent tariff application, which it submitted to the national energy regulator last month.
The tariff application earmarked increases in the price of power at a rate of 16% over the next five years.
These increases however will only meet Eskom's revenue requirement up to the "substantial completion" of its new coal-fired powerstation Kusile, set to come on line in 2018.
Eskom indicated in the application that should any new decisions be made on who should build new electricity generators going forward, it may have to re-submit the multi-year price determination application.
The current tariff application has been criticised by energy users, economists, businesses and trade unions, as unaffordable to the country.
The department of energy could not immediately comment on why the state has opted to go ahead with nuclear power, against the planning commission's recommendations, or provide updated cost estimates.
The national development plan said that the government should reassess the timing and desirability of the nuclear build programme, as it involved investment on a scale "unprecedented" for the country.
"South Africa needs a thorough investigation on the implications of nuclear energy, including its costs, financing options, institutional arrangements, safety, environmental costs and benefits, localisation and employment opportunities, and uranium enrichment and fuel fabrication possibilities," the national development plan said.
The allocation for nuclear generation capacity is outlined in the department of energy's Integrated Resource Plan of 2010 (IRP2010). The IRP2010 is a 20-year road map, outlining the mix of the country's future electricity generation. It allocated 9 600MW of power from nuclear generation capacity, or six new power stations.
Critics have however noted that the IRP2010 is out of date, with many of the cost assumptions it incorporated having changed. It has also taken no account of recent development including "game-changing" sources of electricity, such as gas, which could be more affordable for the country.
Spokesperson for Eskom, Hilary Joffe, said the company "welcomed the decision and would await guidance from government on the process to be followed".
She could not immediately comment on the implications the announcement would have for Eskom's tariff application.