More of our cash for Eskom

The Treasury is ready to bail out Eskom in an attempt to help the power utility keep the lights on.

The decision was taken at a special cabinet meeting on Thursday.

The Treasury yesterday announced measures to plug the funding gap claimed to be behind the litany of woes plaguing Eskom.

These include giving it more government cash, details of which will be revealed when Finance Minister Nhlanhla Nene tables his budget.

Eskom is also likely to borrow R50-billion. The Treasury said the loan would help prevent crippling electricity price increases.

"Although higher debt has a negative effect on Eskom's balance sheet, it is necessary to reduce the immediate impact on electricity consumers.

"Raising more debt is supported by the substantial guarantee facility available to Eskom from the government, which will be used to reduce Eskom's cost of debt, but [Eskom] also needs to be supported by [being] a sustainable industry relying on managing costs and raising sufficient revenue to cover these [costs]," said the Treasury.

Despite the Treasury's and Eskom's efforts to shield households and businesses from increasing tariffs, customers would nonetheless still have to foot some of the cost of preventing Eskom from running out of cash.

The utility said it would approach energy regulator Nersa to "adjust" its tariffs - a sure sign that consumers will be paying more.

"The government will support Eskom's application to Nersa for tariff adjustments in line with the regulatory process.

"Tariff adjustments are a key mechanism that will provide the electricity-supply industry with a sustainable solution and provide Eskom with the revenue and cash flows the utility needs to complete the current programme of building power stations, and repaying debt and the interest on it.

"Nersa will still apply its regulatory oversight, and prudency tests to ensure that costs have been efficiently incurred," said the Treasury.

But Eskom would be required to contain runaway costs associated with the construction of its power stations.