Hours until Eskom decision

Wednesday, February 24, 2010

Pretoria - A six member subcommittee of the National Energy Regulator of South Africa (Nersa) are this morning sitting in the last meeting before making public the regulator's decision on electricity tariffs.

Eskom had originally called for a 45 percent tariff increase, but after strong protests from consumers and businesses alike, they decreased it to 35 percent.

In June 2009, Nersa approved an average price increase of 31.3 percent for Eskom. Eskom had applied to Nersa for an interim price increase of 34 percent.

Investment Solutions economist Chris Hart said any tariff increase was likely to be passed on to consumers, resulting in even less household income.

"Costs are going to go up as alluded to in the national budget; costs for administrative prices will go up. Eskom is likely to get a 25 percent [tariff increase]," said Hart.

He said business will then in turn pass the increase to consumers.

"Business will push the costs to consumers and those who cannot pass the prices on, like mining, will face viability issues."

Nedbank economist Carmen Altenkirch agreed with Hart saying the increase will reduce household income. However, her bet is that the increase will be between 30 and 35 percent.

"They are likely to get between 30 and 35 percent and this will not only impact households directly but it will have a direct impact on business," she said.

However, managing director of the South African Independent Power Producers Association (SAIPPA), Doug Kuni said he doubted that Eskom would get the full 35 percent.

At the public hearings into the matter in January, the South African Chamber of Mines said the impact of the proposed hike would affect the different mining and smelting operations differently.

The decision is expected at noon.