Pretoria - South Africa's energy regulator rejected on Monday a request from cash-strapped utility Eskom to raise tariffs, and the state-owned power company said it would consult with the government on alternative ways of funding.
Eskom, which provides virtually all of South Africa's electricity, is scrambling to repair its ageing power plants and grid, forcing it to impose almost daily power cuts that are hurting economic growth.
Jacob Modise, chairman of the National Energy Regulator of South Africa (Nersa), said crucial information was missing in the application for an average 9.58 percent increase in tariffs.
The utility wants to raise tariffs to pay for diesel to be used to run gas turbines, and to pay for power from independent electricity producers to help make up a shortfall in electricity while some of its coal-fired plants are undergoing maintenance.
Eskom said it would consult with the government, its only shareholder, about whether to make a new application to raise tariffs or find new funding sources.
“We are not blackmailing or making threats, we need diesel and we need to get some kind of assurance of where we can get the money,” Eskom spokesman Khulu Phasiwe said.
The energy regulator also said it was considering imposing penalties if plants did not function properly after maintenance was done. At a public hearing into Eskom's tariff application last week, Nersa said documents submitted by the utility showed that 50 percent of plants break down after Eskom conducts maintenance.
Standard & Poor's (S&P) cut its credit ratings for Eskom in March to junk, which will almost certainly raise borrowing costs for the cash-strapped firm.
Yields on Eskom's bonds rose sharply after the tariff hike was rejected.
Eskom has already raised its tariffs once this year, in April, and the requested price hike would bring the total increase this year to more than 22 percent.
South Africa's public enterprises minister, Lynne Brown, has said the utility would have to tap debt markets if it failed to get the tariff increase.
“If Nersa doesn't give the increase then Eskom will have to re-examine its finances and go out and borrow,” Brown, whose department oversees Eskom, was quoted as saying by the Business Day newspaper.
The power company is facing a funding gap to 2018 of up to R200 billion as it struggles to keep its mostly coal-fired plants running. The government has pledged to inject R23 billion of capital into Eskom.
Reuters