Durban - Electricity price rises could almost triple in 2009 if Eskom has its way with Nersa, the national electricity regulator.
The power utility said this week it was in talks with the regulator and would be looking for increases of 13 percentage points above CPIX (the consumer inflation rate excluding mortgages), or about 18 percent, compared with the scheduled 6.2 percent hike for the year to March 2009.
For the year to March 2010, Eskom is hoping for an increase of 12 percentage points above CPIX.
Eskom's proposals contrast sharply with the current pricing agreement with Nersa of CPIX plus 1 percentage point, implemented in April last year and scheduled to run to April 2009.
In terms of this agreement, the average increase, allowing for changes in inflation, was 5.1 percent for the year to March 2007 and 5.9 percent for the year to March 2008. This will stand but the 6.2 percent increase for the year to March 2009 is now up for renegotiation.
According to data released yesterday, CPIX fell from 5.3 percent in January to 4.9 percent in February.
The Reserve Bank's CPIX target is between 3 percent and 6 percent but rising fuel and food prices could lift inflation above that level.
Nersa could not be reached for comment yesterday.
Eskom spokesperson Fani Zulu said the proposed increases took into account the utility's increase in capital expenditure to R150 billion over the next five years and a spike in coal prices.
When Eskom submitted a pricing application to Nersa in 2005, Zulu said, Statistics SA's coal cost index was increasing at only 3.3 percent year on year.
But Stats SA has reported that local mining costs have increased by 25.7 percent since October 2005 and the cost of coal for domestic consumption has risen by 18.2 percent.
About 85 percent of South Africa's electricity is generated from coal-fired power stations.
Eskom has repeatedly cautioned that local electricity prices, which are the cheapest in the world, were unsustainably low.
A new 4 200 megawatt coal-fired power station costs more than R70 billion to build, which was equivalent to the book value of Eskom's full generation fleet, Zulu said recently.
Operating costs linked to staffing of new power stations and the required fuel have also grown.
Eskom plans to fund a third of this expansion from retained earnings and the balance from debt.
Eskom's R150 billion expansion plan is for the five years to March 2012, which includes building an additional 9 000MW facility to increase installed capacity to 39 000MW.
But Eskom wants to have capacity of 80 000MW by 2025, meaning that electricity prices are likely to continue rising.
Marc Moreau, a director of the SA Chamber of Business and the chairman of the monitoring team that oversaw the Western Cape's 90-day integrated recovery plan to address power shortages, said: "We have to ask ourselves what has changed in the last few years.
"Did Eskom not do its numbers properly when the multi-year agreement was negotiated?"
The multi-year agreement with Nersa was based on a R97 billion five-year expansion programme.
Moreau said there should be an independent national monitoring committee to ensure that Eskom's plans were appropriate for South Africa and were being implemented timeously.
Moreau said it was difficult to comment on the impact on consumers of sharp electricity price increases because it depended on how the hikes would be structured and what the end user would pay.
eThekwini mayor Obed Mlaba, the deputy chairman of the SA Local Government Association, said: "It would be premature to comment as we have not got the details."
BHP Billiton's local spokesperson, Bronwyn Wilkinson, said certain of the group's operations, such as its aluminium assets, had special long-term contracts in place with varying periods to run. All other BHP Billiton operations were on standard contracts, which are subject to annual price increases. She would not comment on speculation about Eskom's proposal to Nersa.
