South Africa’s Eskom wants the country’s energy regulator to raise a 14,2% tariff hike it granted the utility last year, citing escalating coal prices as it battles a nationwide power crisis.
Eskom, which generates most of its electricity from coal, said on Friday it wants tariffs hiked even more than the 18,7% it had initially requested last year but which was rejected by the regulator.
”We will be asking for a review of the 14,2% tariff increase for 2008/09, because market forces have moved materially, especially the price of coal, and there has to be a pass through on primary energy costs,” said Eskom financial director Bongani Nqwababa.
”The tariff increase request will be much higher than when we made the application for an 18,7% increase.”
The 14,2% tariff increase is for Eskom’s 2008/09 financial year, which runs from April to the end of March 2009.
Nqwababa said Eskom hoped to meet the National Energy Regulator (Nersa) within the next two weeks on the review.
Eskom has said the current tariff hike would make it hard for the utility to pay for coal, maintain and expand its power generation capacity to meet demand, and it meant the power firm would have to borrow more.
On Thursday, Eskom said it had secured 34-million of the 45-million tonnes of coal it needs over the next two years to feed power stations as it scrambles to resolve the electricity crisis that has hit mining and industry and darkened homes.
But the coal would come at a higher price than it pays under long-term contracts, Nqwababa said, but declined to say at what price, saying the commercial negotiations were confidential.
Cash flow
”Market forces have moved materially since last year, and we have to buy coal which will have a material impact on our cash flow,” Nqwababa said.
”What has happened since the (14,2%) tariff increase was granted is the market circumstances have changed. We have seen floods in Australia, coal mines have closed for safety reasons in China, so there have been material adverse changes.”
Nqwababa said the result of these events was that coal supply worldwide had tightened and prices had shot up, and the utility had to pass on some of the increased costs to consumers.
The power firm said last week it would increase coal purchases under a plan to fix a power crisis that was declared a national emergency in January.
Diversified miners Exxaro, BHP Billiton and Anglo American — part of a task team set up to counter the crisis — said they had offered Eskom extra coal.
South Africa relies on coal-fired stations for 90% of its electricity, using over 90-million tonnes of coal a year.
Eskom has struggled to meet demand in Africa’s biggest economy, leading to blackouts and rationing. The problem has been exacerbated by plant maintenance closures, breakdowns and dwindling coal stocks.
In January, the world’s biggest platinum and major gold mines were forced to halt production for five days as the electricity grid struggled to cope with demand.
Eskom has asked mining companies to cut power use to 90% of normal consumption, and metal producers have forecast drops in output, spurring a more than 40% rise in the platinum price in the past month. – Reuters