Minister opposed to Eskom price increase application

The National Energy Regulator of South Africa (NERSA) is to announce its decision this week on Eskom's application for an interim price increase of 34%.

“At the outset, I must state categorically that we do not agree that the tariffs must rise rapidly,” said the minister, addressing the media shortly before delivering her Budget Vote in Parliament.

“It is our view that this will lead to unintended consequences; not least of which would be an adverse economic impact in the face of the recession we are experiencing,” said Peters.

Finding balance

She said Eskom's need to expand its infrastructure and subsequent request for a 34% tariff increase must be balanced with the need to ensure electricity is affordable to the poor.

Eskom made an application to NERSA earlier this year to increase its tariffs to cover its operations costs.

The application was made based on six principles - including enabling a thriving economy as well as having an economy that respects sustainability as well as making a contribution to the growth of the country among others.

However, the minister explained that each municipality had a different tariff structure and that they would implement the increase differently.

“During the recent NERSA hearings, municipalities had made submissions against the proposed tariff increase. They had not anticipated it,” said Peters.

Cushioning the impact

She said government was therefore calling for a multi-year price determination structure, to “help communities anticipate what will happen in the future”.

The minister said government had started a process to provide a cushion for the indigent, and would develop an appropriate pricing policy framework to structure the tariff regime such that indigent sections of our communities are insulated from increasing electricity tariffs.

“This would be over and above the Free Basic Electricity allocation, which municipalities are responsible for implementing with varying levels of success.”

Eskom and government are still in talks regarding the funding model and the total requirements of the utility.

Government has set a target of having electricity in every established household by 2012.

'No hike = no electricity'

Earlier this month, Eskom Chief Executive Officer Jacob Maroga said that if the utility was not granted a sizeable tariff increase, it was likely to place the country at risk of not having enough electricity supply.

"If we don't get the right amount of increase this year, obviously depending on the size, it means we have more risk in terms of security of supply," said Maroga at the time.

NERSA will make a ruling on the matter on Thursday.

Article published courtesy of BuaNews