http://www.miningmx.com/news/energy/Eskom-wants-42.8-pct-hike.htm

Tue, 13 Oct 09

Jacob Maroga, Eskom CEO

] -- SOUTH African power utility Eskom wants three price hikes of 42.8 percent or 45 percent for each year over the next three years, incurring the wrath of organised labour, which threatened to strike if the increases are implemented.

Eskom has made an application to the National Energy Regulator of South Africa (Nersa) to approve the hikes, the first of which will become effective in April. Nersa has already permitted Eskom to increase this year's price by 31.3%.

Leaked portions of the document had suggested Eskom wants electricity consumers to pay at least 45 percent more each year over the next three years.

Eskom said the hike would be an average nominal 42.8% or 45% when purchases from some independent power producers were included.

One of the options was to introduce a one-off tariff hike of 146%, increasing the unit cost to 75 cents per kilowatt hour in real terms. The second option spread the hike over three years at 22 cents/kWh per year. The current average price is 33 cents/kWh.

"The smoothing of the price increase should be done in a manner that mitigates the impact on customers and the economy, whilst at the same time allowing Eskom to manage its liquidity and proceed with its capital expansion programme," CEO Jacob Maroga said.

The Congress of South African Trade Unions (Cosatu) rejected the proposal out of hand and called on the government to do more to support Eskom financially.

"The Congress of South African Trade Unions is extremely angry at Eskom’s outrageous and insensitive request for a whopping 45% a year electricity tariff hike over the next three years," it said in a statement.

"COSATU will be vigorously opposing this proposed increase when it is submitted to NERSA," it said, adding it would engage in widespread strike action if the application was approved.

Eskom is aggressively increasing tariffs to pay for a build programme to meet the country's energy needs. South Africa had a power crisis in January 2008 when supply could not be guaranteed for the mines, causing them to shut down for a week.

As at 30 April 2009, Eskom commissioned 4,454 MW at a cost of R54.3bn since its build programme started in 2005. A further 6,184 MW will come on stream within the next five years, Eskom says.

"The federation repeats its call for government to intervene and take responsibility for Eskom’s capital expansion programme, financially and through guarantees, rather than to impose this burden on consumers," Cosatu said.

It proposed an alternative of imposing an infrastructure levy on industrial users or a one-off tax on that sector an "the rich" to fund the expansion programme