Eskom price-hike application stalled

Eskom's application for tariff increases was ready for submission to the government when it was asked to consider additional factors, the parastatal said yesterday.

"We were ready; it was 100% in line with regulation. We had engaged since February with hundreds and hundreds of stakeholders," Eskom finance director Paul O'Flaherty said, "but we have been asked [by the government] to look at two additional things."

O'Flaherty was speaking at a meeting between the parastatal and the SA Chamber of Commerce and Industry, in Johannesburg.

The first factor Eskom was asked to consider was whether new power stations would be built after the Kusile plant, in Mpumalanga, was completed in 2018-2019.

The second was whether independent power producers could contribute more electricity to the national grid.

O'Flaherty said it was too late to expect power from a nuclear building programme by 2023, or500MW from new coal-fired stations by 2014.

"So the question is: What needs to be included [in the submission to the National Energy Regulator]? My expectation ... is that we will get clear direction [on the two issues] this week. If we get it this week, we should be able to complete [the submission] by the end of this month, or the first week of October."

The application for the third multi-year pricing determination was to have been submitted to the regulator on Friday.

It proposes a five-year growth path for tariff increases starting from April 1.

"We can say that [the tariff increases] would be double digit [figures] over five years, on average," O'Flaherty said.

"Four-billion tons of coal are required from now until the end of the lives of our coal-fired power stations," he said.

Coal would have to be allocated to Eskom at an affordable price if it were to keep tariffs down.

"At the moment, coal is half of our operating costs and if we can't get that strategic resource allocated to Eskom at an affordable rate the consumer ... will have to pay for it."

O'Flaherty said Eskom's debt in March was R185-billion and would grow to nearly R320-billion over the next three years.

This meant it would accumulate an interest bill of R24-billion over the next six years.

"Eskom must make sure that we operate and maintain our assets ... so that we can produce the cash flow to pay back this debt.

"Last year we sold electricity on average at 50c a kilowatt hour. This year, on average, it is about 60c - to be cost-reflective today, [it should] be 90c."

He said Eskom was trying to reduce its own use of electricity.