Govt supports Eskom tariff bid 'in principle'

The South African government in principle supports Eskom’s latest proposal for an increase in tariffs, but will leave discussion on the figures to the regulator, a senior official said on Sunday.

David Mahuma, head of clean energy at the Ministry of Energy, said the government agreed that the tariffs needed to rise to help the utility raise funds for its expansion programme, but would leave the decision on the amounts to the energy regulator.

“We do not necessarily support the quantum [which Eskom is asking for], but the principle,” he told Reuters on the sidelines of a solar energy conference.

The utility is battling to raise parts of the R385-billion it needs to pay for new plants to power Africa’s biggest economy and said it would rely on an increase in tariffs, borrowings and government loans for support.

Eskom has been criticised for fuelling inflation fears by raising tariffs by as much as 31,3% this year and 27% last year. The utility has another application pending with the regulator, asking for rises of up to 146%.

One of the proposals is for tariffs to rise on average by 22 cents per kilowatt hour over three years, up from 33 cents.

Mahuma dismissed media reports suggesting that the government was in favour of any particular increase.

“We leave it up to the regulator to make the decision ... but we are in agreement that we are in for above-inflationary increases,” he said.

South Africa’s inflation has slowed sharply this year and stood at 6,4% year-on-year in August.

The utility has been rationing electricity since early 2008 when the national grid nearly collapsed, forcing mines and smelters to shut and costing the country billions of dollars.

South Africa has been cushioned by one of the world’s cheapest tariffs, but Eskom and the energy industry agree that the price of electricity needs to rise substantially, to ease pressure on the utility’s balance sheet and to boost private investment in the sector.

Energy Minister Dipuo Peters said last month that electricity tariffs should not rise too rapidly and called for a tariff structure which would protect the poor, with the industry bearing the burden of future tariff increases.
- Reuters

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