It is reported that Eskom has not yet determined its final application to the National Energy Regulator of SA with regards to its next tariff application.

Mr Brian Dames CEO of Eskom said that "We have not determined our final application to the regulator. We have prepared a proposal application. We have not decided on a final tariff increase."

In June 2012, the power parasTATA announced that it had initiated its next tariff ignition by submitting its draft Multi Year Price Determination to the South African Local Government Association and National Treasury for comment.

The MYPD 3 will set out electricity prices for the period beginning April 1st 2013. This as the second MYPD2 expires at the end of March 2013.

Mr Dames said that "The end game around tariffs is that electricity tariff increases should get a lot closer to inflation. Half of our current cost structure is coal cost. We cannot apply for an inflationary tariff increase if our coal cost goes up higher than inflation. We are regulated and the coal industry in South Africa is not regulated."

He added that "We have to recover our costs. We cannot provide you with inflationary increases if the coal goes up higher than inflation because its half our cost."

Eskom is to spend over ZAR 300 billion on its power station build program. The parasTATAl currently has debt worth ZAR 182 billion raised locally and internationally that needs to be paid back, of which the interest bill on that is an average ZAR 23 billion a year for the next five years.

Mr Dames said that "We have to pay it back. That would mean that we would need a return on average over the next five years just to cover the interest. We find our expansion not through tariffs but from debt in the market."

The company recently announced a ZAR 13.2 billion profit for the 2011-12 financial year.

He said that "We're currently not making enough profit to pay back our annual interest bill. That is the position we're in and that gives you a clear indication that electricity prices are not cost reflective."

Eskom was building additional power stations due to the country's growth.

Mr Dames said that "This is not an investment in Eskom it's an investment in South Africa."

He said that of Eskom's expansion program, ZAR 75.1 billion worth of contracts have been awarded to South African companies. He added that "That represents 62.2% of all contracts we have placed on the expansion program. That's a clear part of our strategy to create jobs and to make sure we support the economy."

Also speaking at the breakfast, Eskom chairperson Mr Zola Tsotsi said that it was important that South Africans embraced energy efficiency as a culture.

Public enterprises minister Mr Malusi Gigaba urged businesses to be energy efficient, adding that government was committed to ensuring that the lights stay on. He warned against the wastage of electricity by households, business and government.

Mr Gigaba said that "The difficult situation we are now in is a result of our old ways. We were not investing in new generation capacity which is one of the reasons that we have had tariffs set at 25% which have been reduced to 16%."

Source - South African Government News Service

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