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February 22, 2008, 15:30
Eskom said it wanted the energy regulator to let it put up prices more than the 14.2% tariff hike it was granted last year, citing escalating coal prices as it battles a nationwide power crisis.
The Congress of SA Trade Unions (Cosatu) said it would consider protests if electricity prices go up again, potentially exacerbating a crisis that has disrupted mining and fanned investor worries over the country’s economy.
The Reserve Bank declined comment on Eskom's request, but has said excessive tariff increases will add to inflationary pressure, already high because of rising food and fuel prices.
Eskom, which generates most of its electricity from coal, said it wanted tariffs hiked even more than the 18.7% it had initially requested last year but which was rejected by the regulator.
"Market forces have moved materially, especially the price of coal, and there has to be a pass through on primary energy costs," Eskom Financial Director Bongani Nqwababa said. "The tariff increase request will be much higher than when we made the application for an 18.7% increase."
The 14.2% tariff increase is for Eskom's 2008/09 financial year, which runs from April to end-March 2009. Nqwababa said Eskom hoped to meet the National Energy Regulator (NERSA) within the next two weeks on the review.
"We cannot say that we will not consider it. We will look at the application they (Eskom) present," Brian Sechotlho, who heads NERSA's electricity pricing and tariffs department said.
Eskom has said the current tariff hike would make it hard for the utility to pay for coal, maintain and expand its power generation capacity to meet demand, and it meant the power firm would have to borrow more.
Power hungry
Yesterday, Eskom said it had secured 34 million of the 45 million tonnes of coal it needs over the next two years. However, the coal would come at a higher price than it pays under long-term contracts, Nqwababa said. He declined to comment on the price, saying the commercial negotiations were confidential.
Nqwababa said coal supply worldwide had tightened and prices had shot up, and the utility had to pass on some of the increased costs to consumers.
The prospect of higher electricity prices drew fire from Cosatu. "We are extremely concerned," Cosatu spokesperson Patrick Craven said. "We would certainly consider protest action."
Diversified miners Exxaro, BHP Billiton and Anglo American -- part of a task team set up to counter the crisis -- said they had offered Eskom extra coal. South Africa relies on coal-fired stations for 90% of its electricity, using over 90 million tonnes of coal a year.
Eskom has struggled to meet demand in Africa's biggest economy, leading to blackouts and rationing. The problem has been exacerbated by plant maintenance closures, breakdowns and dwindling coal stocks. - Reuters
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