South Africa Power Price to Rise 13% to Offset Eskom Costs

South African power prices will rise more than first planned from April to help the state-owned utility recover 7.8 billion rand ($693 million) of unbudgeted costs, the regulator said.

Electricity tariffs will increase by an average 13 percent, more than the 8 percent initially approved for the year through March 31, 2016, the Pretoria-based National Energy Regulator of South Africa said in an e-mailed statement today.

The regulator in July found costs for Eskom Holdings SOC Ltd. exceeded projections in the three years through 2013, paving the way for higher tariffs. The company had applied to recover 18.4 billion rand. The inflation rate was 6.4 percent in August.

“We are getting less-reliable electricity for higher and higher prices, when we should be going in the opposite direction,” Mike Schussler, chief economist at research group Economists.co.za., said by phone from Johannesburg. “It’s becoming a major problem. We are becoming uncompetitive.”

Eskom, which provides 95 percent of the country’s power, has been forced to implement managed blackouts this year as it struggles to meet demand. The company has a 225 billion-rand shortfall in funding over five years through March 2018. The government’s rescue plan for the utility includes a capital injection and an increase in government-guaranteed debt.

Eskom has installed capacity of 41,995 megawatts of electricity across 27 plants. It is currently building two new coal-fired power stations -- Medupi and Kusile -- which will be Africa’s biggest when complete. The utility uses coal for about 80 percent of generation.

“It’s very unlikely that we are going to see anything less than double-digit increases in the next five years,” Schussler said. “This is something we cannot afford. We are a major coal-producing nation. We should have electricity that is at least a third cheaper than the rest of the world.”

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