Eskom seeks big jump in power rates - report

Eskom may apply to raise electricity rates by 19 percent a year on average over five years.

Eskom. Picture: EWN

CAPE TOWN - South African power utility Eskom may apply to raise electricity rates by as much as 19 percent a year on average over five years, a confidential document obtained by Reuters showed on Friday.

Eskom said in a statement it had yet to finalise the application it will submit to the national energy regulator for the rate hikes to take effect from April of next year.

In the document obtained by Reuters, Eskom said it could seek increases of at least 14.6 percent a year on average over the period and possibly as much as 19 percent, depending on certain government decisions.

Eskom needs to fund an expansion drive and build new power plants to keep the lights on in Africa's largest economy.

Sharply rising power rates have added hugely to the costs of key sectors such as mining in the world's biggest platinum producer.

Eskom, one of the world's lowest-cost electricity producers, which provides 95 percent of the country's power, was granted three years of 25 percent power tariff hikes in 2010.

"In the base case Eskom requests revenues totalling 1.07 trillion rand ($128 billion) over the five-year period, which translates into annual average price increases of 14.6 percent," Brian Dames, Eskom's CEO, said in the document marked "strictly confidential".

But this could climb to 19 percent if the government brings in a carbon tax or builds new plants beyond those under construction, the document says.

Eskom said it would be mindful of the economic impact of such inceases.

"Eskom will take heed of the need for economic growth and job creation in South Africa, but will seek to balance this with the country's need for a financially viable and sustainable electricity industry. Electricity tariffs are not yet at cost reflective levels," Eskom said in the statement.