Reuters reported that South Africa's power utility Eskom has recommended a gradual increase in electricity tariffs as the best option to protect the economy and customers.

The new tariff hike application said that the proposal was one of two options submitted by Eskom and is based on an average yearly tariff increase of 22 cents per kilowatt hour over 3 years up from 33 cents.

Eskom recommends that the smoothing option be considered as it mitigates the impact of price increases on customers and the economy and it provides for a more sustainable long term solution.

Eskom said that it requires the multi year tariff increases which cover the period 2010 and 2011 to 2012 and 2013 to help fund an ambitious ZAR 385 billion expansion plan to meet fast rising demand in Africa's biggest economy.

South Africa has been cushioned by one of the world's cheapest electricity tariffs but the utility and the energy industry agree that the price of electricity will have to rise substantially to boost investment in the sector and help pay for Eskom's power generation program.

(Sourced from Reuters)