Cape Town - Consumers will be paying 250 percent more for electricity than they did in 2008 if Eskom is granted the 25 percent increase it has asked for.
This represents the cumulative increase in electricity price hikes granted by the National Energy Regulator of South Africa (Nersa) to the electricity utility since 2008, plus the increase Eskom applied for last week when it asked the national regulator to re-open the process for setting price hikes.
In contrast, consumers who have had 5-percent annual salary increases over this period will have had a cumulative salary increase of around 40 percent since 2008.
Eskom has asked the national regulator for the Multi-Year Price Determination (MYPD) process to be re-opened because when it put in its earlier application for a 9.58 percent increase for 2015/16, it had assumed Kusile, Medupi and Ingula would be generating power by a certain date.
That is no longer the case as these projects have been extensively delayed. This means Eskom will have to run its hugely expensive open-cycle gas turbines – run on diesel – for longer than expected, but no provision was made in its earlier price hike application for paying for this quantity of diesel.
Eskom is asking for an additional 12.69 percent for 2015/16. With the environmental levy, this comes to a total of a 25.3 percent increase.
Eskom said it had paid R4.5bn in diesel for the turbines since December: R1.7bn in December/January, R1.4bn in February and R1.4bn in March. This had resulted in a cash-flow problem. The total diesel cost for the 2014/15 financial year is forecast at R11.5bn.
Eskom said it would have spent R20bn on diesel for the turbines in two years – exceeding the R10bn allowance it had been given in the price hikes to cover five years’ diesel costs.
The turbines, one in Atlantis and another in Mossel Bay, were built for emergencies and to meet peak demands, but because of the electricity crisis have been running for much longer.
Eskom said a second reason it needs a bigger price hike was to be able to extend its contracts with companies such as Sappi, Sasol and Mondi, which generate power and sell it to Eskom under the short-term power purchase programme. Eskom would need money to extend these contracts.
Cape Times