Eskom wants electricity prices to double

The electricity utility wants a 16%/year increase for the next five years.

Added by Editor on 22 October 2012.
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Eskom has asked for a 16% increase in electricity prices each year for the next five years, the parastatal said on Monday.

“We seek to ensure that Eskom can cover the costs of supplying the electricity needed to power SA and invest in the future,” CEO Brian Dames said in Johannesburg.

This would more than double the price of electricity from 61c/kWh in 2012/13 to 128c/kWh in 2017/18.

The 16% increase was broken down into a 13% increase for Eskom’s own needs and 3% for the introduction of independent power producers.

Eskom said electricity had been charged at below reflective costs and this was not sustainable.

“Our application balances SA’s needs for a secure supply of power and for a sustainable electricity industry, with our recognition of the impact which tariff increases have on the economy, particularly on the poor,” Dames said.

Eskom submitted its application for the increases to the National Energy Regulator of SA (Nersa) on Friday.

The current Multi-Year Price Determination, MYPD2, ends on 31 March 2013.

Nersa will announce its final decision in February, following an extended period of consultation and public hearings.

“This is the start of a process. This is not a decision. A decision will be made by the regulator,” Dames said.

He said the application proposed a price path that migrated electricity prices towards a level where they covered the full cost of producing electricity. This would include operating costs such as coal, maintenance and employees, and the cost of servicing the debt raised to finance Eskom’s new build programme.

Eskom’s application proposed a tariff structure which would cross-subsidise poor households which used little electricity. In terms of this, these households would get single-digit price increases.

Dames said the parastatal would apply to Nersa this week to review a special pricing agreement it was tied into with BHP Billiton for its aluminium smelters in KwaZulu-Natal.

“The special pricing agreements link the price the smelters pay for electricity to the dollar price of aluminium and were entered into in the 1990s when Eskom had surplus generating capacity, which is no longer the case.”  — Sapa

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  • Hason Moosa

    This is insane!!!!!!!!! Already the costs are high and with the current inflation and costs on the consumers its unaffordable

  • Davebee

    This move will instantly send the South African economy into such a downturn that it will never, ever recover. For a senior manager to prattle on about a ‘sustainable’ power supply while he hikes that supply’s price by 200% shows the man needs to be removed before he creates any further and fatal damage to this country. ( I also recommend psychiatric evaluation)
    He hasn’t a single thought in his woodenly stupid head other than HIKES, HIKES, HIKES.
    If there really is a need for CATASTROPHIC funding then that need must be met by increasing VAT to16% and keeping the additional 2% for Project Power and make that a national goal, and not to put the middle class OUT OF EXISTENCE and industry OUT OF BUSINESS!

  • David H

    “This would include operating costs such as coal, maintenance and
    employees, and the cost of servicing the debt raised to finance Eskom’s
    new build programme.”
    The first thing Brian Dames needs to do is get his house in order. It has often been reported that Eskom is not cost efficient. Get rid of the fat, fraud and corruption and then tell us what it really costs to supply electricity. Over what period are capital charges being amortized, standard or foreshortened?
    Rather than going through the pain and agony of addressing the nuts and bolts of misdirection, it’s easier to keep lumping price hikes on unrealistic operating costs because most South Africans can’t live comfortably without the product.
    Mr. Dames, are we dealing in truth, or fiction of the most disgusting kind?

  • TRTRZ

    They can get 3x 4x the present cost, but they will never, ever get the country’s electrical infrastructure where it should be as long as this basic service is used as a platform for social reform (completely and utterly outside of its mandate by any reasonable measure) and also definitely not while there are any irregularities in spending. The problem is of course that they’ve managed to rack up fantastic debt during a time when not much seemed to be going on that can be called building and developing the infrastructure. I mean what exactly have they done in the past 20 years that is notable? Al they have been doing is paying big industry not to operate in SA. It is retarded! It is not a little known fact that government management is extremely inefficient. I’m not talking about SA or Africa in general. I’m talking about a basic fact of humanity as we exist in this day and age. Government always operates at a loss. This is not the way to build a nation.

  • SAResident2012

    So if Coal really i the culprit driving the price, why in heavens name is South Africa not increasing it’s investment substantially into renewable resources, e.g. Wind Farms etc.
    To me the blanket called Coal is covering what’s happening under the covers.

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