South African electricity prices are set for an above inflation increase from April 2006 to fund power utility Eskom's 84 billion rand (about 13 billion US dollars) expansion program over five years.

The statement was made by Eskom Managing Director of Resources and Strategy Dr Steve Lennon at a Metal Events conference at Sun City, about 200 km north of Johannesburg.

However, Lennon wouldn't comment about whether Eskom was seeking an electricity price increase above the top end of the SA Reserve Bank's (SARB) inflation target at 6 percent.

Delegates at the conference said that Eskom could be seeking an electricity price increase of 1 percent to 2 percent above CPIX, which was currently just above 4 percent, which could mean that Eskom was seeking an increase of between 4.5 percent and 5.5 percent in electricity prices from April 1 2006.

The National Energy Regulator (NER) is currently going through a public participation process to determine the electricity price increases that will be effective for the three-year period starting in April. The result of the process is likely to be known by February.

The NER has said that it won't consider inflation targeting when deciding on what level electricity prices should increase, rather the level of return needed by Eskom and the specifics of electricity as a commodity would be considered.

By 2011, Eskom was aiming to increase its electricity capacity by 4,000 megawatts to meet South Africa's increasing electricity demand, Lennon said.

Eskom currently has 24 power stations, of which 13 are coal fired, two are gas turbines, six are hydroelectric stations, two are pumped storage stations and the Koeberg station near Cape Town was the only nuclear powered station.

At present, South Africa has the lowest industrial electricity costs in the world, according to US consultancy NUS, at 3.71 US cents per kilowatt hour for industrial users with 1,000 kilowatt connection and monthly usage of 450,000 kilowatts, Lennon added.

South Africa's industrial electricity cost was 24 percent cheaper than second placed Canada at 4.88USc/kW hour and cheaper than countries like Australia, Sweden, France, Britain, the United States and Germany.

South African electricity demand was expected to grow at 1,200 megawatts per annum over the next 20 years with about eight stations required over that time, with Eskom having made commitments to build 10 stations, Etzinger said.

Source: Xinhua