Siseko Njobeni
1 December 2009
Johannesburg — POWER utility Eskom has caved in to pressure and reduced its tariff increase application from an initial 45% to 35%.
Yesterday was the deadline for Eskom to submit a revised and final application to the National Energy Regulator of SA (Nersa).
The utility has kept details of its application under wraps but, according to two sources, it was requesting 35%, which may be more palatable to business and labour than its initial request for 45% increases a year for the next three years.
A 45% increase would have been the second-highest hike in Eskom's history.
By late yesterday afternoon, Eskom had not submitted its application to Nersa, according to spokesman Charles Hlebela.
But he said Nersa still expected to receive the application last night. He did not give details.
The initial 45% application was criticised for its effect on poor people, and analysts warned that it would be inflationary.
Reserve Bank deputy governor Brian Kahn said last week that any hike above 30% would be inflationary. Speaking in Parliament, Kahn said SA would continue to exceed the upper level of its inflation target range if Eskom got a 45% increase. Inflation would dip below 6% next year, but if the Eskom hike was above 30% it would push inflation out of the targeted band of 3%-6%, he said.
Economists have warned that a high tariff would also render critical sectors such as mining unviable. The African National Congress and Congress of South African Trade Unions also scoffed at the proposed 45% tariff hike.
At last year's energy summit, which included Eskom, the government, labour, political parties and organised business, it was decided that future price increases would be "smoothed" over a longer period to avoid the shock effect of a sharp increase.
The changes in Eskom's application will frustrate Nersa's approved timelines for the processing of the utility's multiyear price determination for the period from April 1 next year to March 31 2013.
Yesterday was the closing date for comments on the application, according to the paper that the regulator issued at the end of October in which it set out the matters on which it wanted the comments to focus.
The regulator may be forced to extend the deadline for comments on the application to accommodate the changes.
Nersa is due to hold public hearings on the application next month, and it is expected to announce its decision on February 24 next year.
By yesterday afternoon, Nersa had received 296 comments, Hlebela said.
Hlebela said last week that the regulator would be in a position to assess whether it was necessary to change the timelines of the application only once it had received Eskom's final application.
Eskom has said that it needs the high tariff increase to keep its R385bn capital expansion programme on track. According to Eskom, SA needs an additional 20000MW of power by 2020.
Uncertainty about the increase has prompted the utility to put on hold contracts for Kusile, one of two new coal-fired power stations in Mpumalanga.
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