Oct 7th - Eskom to Increase Free Power to Poor

by Linda Ensor 7 October 2009 12:37

All Africa

AFNWS

English

(c) 2009 AllAfrica, All Rights Reserved

Cape Town, Oct 07, 2009 (Business Day/All Africa Global Media via COMTEX) -- Eskom had proposed an increase in the allocation of free basic electricity in its tariff increase application as a way of shielding the poor from substantial hikes in electricity prices, Eskom CEO Jacob Maroga said in Parliament yesterday.

A big hike in electricity tariffs is expected when the National Energy Regulator of SA (Nersa) decides on Eskom's multiyear tariff application and the only way that this will be politically acceptable is if measures are proposed to limit the effect on the poor -- a continuing concern of members of Parliament's public enterprises committee.

Maroga did not disclose what tariff increase Eskom has asked for, but told the committee it would have to generate enough revenue to support its huge R385bn capital infrastructure programme and the borrowings required for this.

The government has extended a R60bn subordinated loan to Eskom and provided guarantees of R176bn, but Maroga said the utility's lenders would want to know that its future revenue stream was going to be sufficient to repay its loans. Nersa CEO Smunda Mokoena said in a briefing to the committee that affordability was a "major issue" during periods of high price increases.

Options to protect the poor included increasing the amount of free basic electricity from the current first 50kWh a month; making low-consumption domestic tariffs free of value-added tax; and providing energy-efficient housing.

The South African Local Government Association and municipalities have been given 40 days to comment on Eskom's tariff application and their views will be reflected in an adjusted application.

Nersa will then conduct public hearings and is expected to make a determination by the end of February next year. This would allow Parliament to endorse it by March 15 for implementation of the increase from April 1.

Maroga told the committee that Eskom was engaged in talks to renegotiate long-term aluminium contracts with the aim of delinking them from the aluminium price, which has fallen sharply during the global financial crisis.

These commodity-linked contracts have been blamed for the utility's record annual loss. BHP Billiton , however, has insisted that its commodity-linked contracts were internationally competitive.

"Going forward we are engaging with them to start saying: we want to remove this linkage of commodity to the price so that they can now also pay standard tariffs," Maroga said.

He told reporters after the meeting that Eskom hoped to reach its target of a 15% reserve margin, or spare capacity, in five years, from 10% at the moment.

Source: Factiva

http://factiva.com/index_f_w.asp

Document AFNWS00020091007e5a700143