Cape Town - 121022 - South African power utility Eskom has applied to more than double the price of its electricity over the next five years. The state-owned utility said it has applied for a 16 percent annual increase for five years from April 2013 to March 2018. Many South Africans are struggling with the current cost of electricity. Pictured is teacher Michael Guzana with his son Hluma Guzana. Reporter: Yolisa Tswana PICTURE: SUPPLIED

Pretoria - An eight percent tariff increase was sufficient for Eskom to fulfil its obligations, the National Energy Regulator of SA (Nersa) said on Thursday.

“Our function is not to run Eskom into the ground,” Thembani Buluka, chairman of a Nersa electricity subcommittee, told reporters in Pretoria.

Nersa was announcing the new eight percent tariff increase, which is half of the 16 percent Eskom had applied for, for the next five years.

“The increases given are sufficient for Eskom to continue operating the power system,” said Buluka.

He said the decision on tariffs was made independently of Eskom.

“No, we did not speak to Eskom. We tell them what the decision is,” he said in a response to a question.

Asked whether Eskom could change Nersa's decision, Bukula said legislation allowed for the parastatal to approach the high court, if necessary.

Peter Montalto, emerging markets economist for Nomura International, said Nersa's decision was bad news for Eskom's balance sheet.

“The government is asking Eskom to accelerate its infrastructure programme and take the bulk of that programme on its shoulders,” he said.

“ 1/8It does 3/8 not allow it to raise funds through user-pay-principle to fund it.”

However, this was good news for inflation as it would reduce inflation forecasts by 0.16 percentage points from July this year, Montalto said.

“Inflation may well only be around five percent at year end, hence no need to hike rates this year at all, nor well into the middle of next year.”

Nersa chairwoman Cecilia Khuzwayo said its decision was “based on facts”.

“The third multi-year price determination 1/8MYPD3 3/8 will be eight percent over the next five years.”

This meant the total revenue approved for the five-year period amounted to R906,553.

Khuzwayo said a detailed analysis was done on Eskom's application.

“Eskom must ensure that alternative tariffs, other than time-of-use tariffs, are available to municipalities with a predominantly residential load mix.”

She said Nersa had followed due processes and held public discussions on the tariffs.

“Approximately 200 written stakeholder comments were received. A total of 162 oral representations were made during public hearings conducted in nine provinces,” she said.

“Our challenge... has been and still remains regulating the energy sector in the manner that balances the interests of energy producers on one hand and consumers on the other hand.”

The parastatal has previously said it needs the increase to cover the costs of supplying the electricity needed to power South Africa and to invest in infrastructure.

The proposed increase was met with criticism by political parties, unions, civil society, businesses, and South Africans in general. - Sapa