(Bloomberg) -- South Africa’s government plans to intervene to keep power prices lower after the state utility asked a regulator to allow it to raise tariffs by 36%.
Electricity Minister Kgosientsho Ramokgopa said he’s confident the government will take action before the National Energy Regulator of South Africa rules on Eskom Holdings SOC Ltd.’s application by the end of the year. By comparison, South Africa’s annual inflation rate was 4.4% in August.
“There could be a policy intervention we could make to provide some measure of relief,” he said at a Standard Bank Group Ltd. conference in Johannesburg on Wednesday. In addition to preserving the financial viability of Eskom “we don’t want to undermine the ability of the economy to grow” and we don’t want to push the poor deeper into poverty, he said.
Eskom’s tariff application for its next financial year is the latest impediment to economic growth presented by South Africa’s struggles with power supply. While the rolling blackouts that hit Africa’s biggest economy intermittently since 2008 — deterring investment and forcing companies out of business — were brought to a halt about six months ago, electricity costs have risen 600% since 2006.
Read: Eskom Asks South Africa Regulator for 36% Power-Price Hike
The government pledged a 254 billion rand ($14.7 billion) bailout for the indebted power company in February 2023. That amount was cut by 4 billion rand a year later, after Eskom failed to meet a condition attached to its debt-relief plan.
“We will provide the relief to everyone,” Ramokgopa said, without specifying what action will be taken other than saying the government could suspend certain requirements it has of Eskom. “I am confident that this is not that the figure we will be seeing.”
Prices will fall as the country takes on more renewable energy as private companies build more plants, the minister said. South Africa currently relies on coal for about four-fifths of its power and Eskom has a near monopoly.
Eskom said its application was based on the costs it will incur to provide power. The utility also applied for a 11.8% increase in its 2027 financial year and 9.1% hike the following year.
City Opposition
South Africa’s second-most populous city, Cape Town, has said it will take legal action against the proposed price increases.
On July 18, shortly after the formation of the first coalition government since the 1990s, President Cyril Ramaphosa said in a speech that the government will take action to rein in rises in administered prices such as electricity.
(Updates with power cuts and costs in fourth paragraph)
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