Pretoria - Electricity supplier Eskom said on Tuesday it would try to minimise the risk of power cuts after South Africa's energy regulator refused to let it raise prices by more than 9.4 percent.
Eskom, the sole supplier in Africa's most industrialised economy, had asked for much bigger price hikes to recover R22.8 billion ($1.45 billion) in costs from 2013/14, when it ran expensive diesel plants and brought in more green power to keep the lights on.
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The regulator, Nersa, said it was allowing the utility to recover R11.2 billion by raising the price, or tariff, paid by customers.
“We are giving them half of what they had asked for,” Nersa chairman Jacob Modise told reporters. “The energy regulator decided that the average tariff for standard tariff customers be increased by 9.4 percent for the 2016/17 financial year only.”
Eskom is scrambling to repair its ageing power plants and grid. Last year, the utility was forced to impose almost daily power cuts, or “load shedding”, that hurt economic growth.
Chief Executive Brian Molefe said in a statement the regulator's decision did not address the question of Eskom's continued financial sustainability.
“It will have operational consequences,” he said. “We will do our best to minimise the risk of load shedding, striking a balance with Eskom's already depleted balance sheet.”
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Analysts said there was an increased threat of power cuts now that Eskom had failed to get the requested increase.
“Eskom's application, if approved in its entirety, would have seen electricity tariffs climb by as much as 16.6 percent,” said Jeffrey Schultz, economist at BNP Paribas.
“South Africa's electricity system remains extremely tight and, therefore, further electricity supply cuts later this year are not out of the question.”
The mining sector, hard hit by weaker metal prices and beset by job cuts and mine closures, said operations would be weighed down further by higher electricity prices.
“For the struggling mining sector this increase will have a major impact on increasing the industry's cost base,” Chamber of Mines CEO Roger Baxter said in a statement.
“Further pressure on electricity prices will push a number of mining companies further into the red, necessitating further restructuring.”
REUTERS