The 13.3 percent electricity hike announced by the National Energy Regulator of South Africa (Nersa) on Wednesday set Eskom and the energy sector in general on the path to long-term financial sustainability, said Eskom chief executive Jacob Maroga.

In a statement, Eskom said the latest hike, together with the 14.2 percent approved on December 20 last year, resulted in a 27.5 percent average increase year-on-year.

It would allow for the recovery of additional primary energy costs of R2.827-billion through the electricity tariff.

Eskom had asked Nersa for a revision of the 2008/2009 electricity price increase from 14.2 percent to 53 percent.

Eskom welcomed Nersa's decision that the poor only pay the 14.2 percent increase.

"This is a positive move towards minimising the impact of this electricity price increase on the poor," said Maroga.

Changes in primary energy costs

Nersa chairperson Collin Matjila said that in circumstances where an individual municipality could not afford to subsidise the poor from its customer base, a mechanism had to be formulated for Eskom to limit the increase to these municipalities.

Nersa also announced that a mechanism be developed to take into account unforeseen changes in primary energy costs and other costs.

"This, in terms of Nersa's decision, must also take into account the efficiency of costs, the prudence with which the costs are incurred, measures taken by Eskom to control these costs, and the utility's ability to predict such costs at the time of the application," Eskom said.

It also welcomed Nersa's move towards the "smoothing" of future electricity price increases.

Impact on ordinary South Africans

"The energy regulator's indication, that based on current assumptions, tariff increases of between 20 percent to 25 percent per annum are projected over the next three years, is also welcomed," said Maroga.

"We do realise this increase would have an impact on ordinary South Africans and also on business," Matjila said.

However, the negative impact had to be considered against the need to ensure that Eskom remained a "viable entity".

"By sustaining Eskom we're also sustaining the economy," he said.

The latest increase will see consumers buying their electricity from municipalities pay on average 32.6 percent more for power this year -including the original 14.2 percent increase.

Eskom's municipal customers, which include licensed distributors at municipal level such as municipalities, will pay on average 35.9 percent more from 1 July.

Non-municipal customers, including the mines, will pay an additional 20 percent on the 14.2 percent already implemented.

Nersa said the government needed to review what portion of the R60 billion budgeted for the utility's expansion programme would be spent this year if Eskom was to maintain a strong balance sheet which would support its credit rating.

Nersa also said it would amend Eskom's licence to ensure the utility managed its risks efficiently.

Sapa