Electricity PRICE may RISE BY 60%

Marcia Klein

Marcia Klein

Eskom has asked its regulator to revise its 14,2% price increase to a massive 60% which, if granted, will have huge implications for inflation and economic growth.

The National Energy Regulator of South Africa said yesterday it received an application from Eskom for a revision of the 14,2% price increase decision for 2008/9 (applicable from April 1) to 53% (excluding inflation) or a nominal 60%.

The regulator did not comment on future increases, but it is believed that Eskom could have asked for a further 50% increase each year for the two years thereafter.

According to Nersa, the increase was asked for because of increased primary energy costs, and "accelerated demand side management costs".

Econometrix chief economist Azar Jammine said yesterday the increase "would have a drastic effect on inflation and economic growth".

He said the 60% would have an immediate and profound effect on producer inflation and would hit disposable income and company profits. It is understood the electricity price increase could add as much as 4% to producer inflation.

Jammine also warned that the increase would be a lesson to SA that when governments interfered in the economy to artificially reduce prices, as had been the case with electricity under the past government and which was under consideration in, for example, private hospitals under this government, "you get distortion which later hits you in the face".

On December 20 the regulator granted Eskom an average price increase of 14,2%, applicable from April 1. However, with regard to the utility's request for the 60% increase, the regulator said that "in the light of the current electricity supply shortage and load shedding in the country", it would give the application urgent attention - but gave no indication of when this would happen.