Press / Media | Cadiz News
Tariff hike ‘cannot meet Eskom’s needs’
06 April 2010
A 25% rise in electricity tariffs puts Eskom's major projects, especially the Kusile coal-fired power station, at risk, says a local economist.
A derailment of the utility's build programme significantly raises prospects of power shortages in the next few years. In a report on the effect of the 25% tariff increase that Eskom recently got approval for from the National Energy Regulator of SA (Nersa), Cadiz economist Kim Silberman said if Kusile was not completed, SA could experience power shortages as early as 2013.
Eskom is yet to publicly comment on the effect of Nersa's decision to grant it a 24,8% rise in this financial year, 25,8% next year to 2012, and 25,9% in 2012 to 2013. The utility had applied for an average 35% tariff increase in the next three years. Silberman said that, to complete the R142bn Kusile plant, Eskom needed a 31% tariff increase.
“At 33c/kWh, Eskom is not covering its operating costs.
“Historically, the price of electricity has been below the cost of supply. It has not covered depreciation or return on assets," Silberman said. The low electricity prices had prevented Eskom from building cash reserves for refurbishment and capital expansion.
Silberman also questioned the rising costs of Eskom's capital expenditure programme. Its forecast of the programme has risen from R84bn in 2005 to R385bn. “These discrepancies raise questions. Either there has been inadequate planning by Eskom, or Eskom grossly underestimated costs, or Eskom has overpaid for contracts. There are references in past Eskom reports in 2004 to building Medupi for around R4Obn. Doubling to R8Obn in 2008 seems a rapid increase," she said.
Medupi is now estimated to cost Rl2Obn.
Silberman said that possible solutions to ease Eskom's financial problems included a loan levy, a review of Nersa's tariff decision, extra equity investment by the government and increasing government guarantees for Eskom debt.
