S Africa backs big electricity price increase
Sunday, 23 March 2008
JOHANNESURG, March 22 (Reuters): South Africa's government yesterday backed a plan to raise electricity prices more than 50 per cent to tackle a power crisis hitting vital mines, despite fears it could fan inflation in Africa's biggest economy.
State-owned power utility Eskom earlier this week asked South Africa's energy regulator for approval to hike electricity tariffs by 53 per cent this year, angering consumers and raising concerns about inflation.
But the government said it supported a tariff increase to help offset higher fuel costs and address a power crisis that has shut mines in the world's biggest platinum producer and plunged millions of homes into darkness.
"South Africans must come to terms with the reality that it would be difficult for Eskom to continue to provide the cheapest electricity rate in the world," a cabinet statement said.
The central bank governor said on Wednesday Eskom could find other ways to fund an expansion programme than to raise prices by such a large margin, saying such a hike would make it difficult to bring inflation back to a 3-6 per cent target.
Inflation reached a 5-year high of 8.8 per cent year-on-year in January.
Buoyant economic growth has in recent years seen millions of poor people living in black townships connected to power for the first time and Eskom is struggling to keep up with demand after years of underspending on generating capacity.
The energy grid came close to collapse in January, forcing gold and platinum mines to shut down for five days and driving precious metal prices higher. A fresh power crisis this week threatened supplies to mines and prompted rolling blackouts in homes.
In a statement late yesterday, Eskom said two of its generating units that had been undergoing unscheduled maintenance had come back on line this morning, helping improving the electricity supply situation.
Earlier, the department of public enterprises said cash from the proposed tariff increase would be used to pay for higher fuel costs, not for expanding capacity. It said the poor and small businesses would pay less.
State-owned power utility Eskom earlier this week asked South Africa's energy regulator for approval to hike electricity tariffs by 53 per cent this year, angering consumers and raising concerns about inflation.
But the government said it supported a tariff increase to help offset higher fuel costs and address a power crisis that has shut mines in the world's biggest platinum producer and plunged millions of homes into darkness.
"South Africans must come to terms with the reality that it would be difficult for Eskom to continue to provide the cheapest electricity rate in the world," a cabinet statement said.
The central bank governor said on Wednesday Eskom could find other ways to fund an expansion programme than to raise prices by such a large margin, saying such a hike would make it difficult to bring inflation back to a 3-6 per cent target.
Inflation reached a 5-year high of 8.8 per cent year-on-year in January.
Buoyant economic growth has in recent years seen millions of poor people living in black townships connected to power for the first time and Eskom is struggling to keep up with demand after years of underspending on generating capacity.
The energy grid came close to collapse in January, forcing gold and platinum mines to shut down for five days and driving precious metal prices higher. A fresh power crisis this week threatened supplies to mines and prompted rolling blackouts in homes.
In a statement late yesterday, Eskom said two of its generating units that had been undergoing unscheduled maintenance had come back on line this morning, helping improving the electricity supply situation.
Earlier, the department of public enterprises said cash from the proposed tariff increase would be used to pay for higher fuel costs, not for expanding capacity. It said the poor and small businesses would pay less.