Consumers should carry the costs of fuel hikes and coal-price fluctuations rather than Eskom, the power utility said on Wednesday.
Eskom CEO Jacob Maroga was arguing for regular electricity-price adjustments similar to those in the fuel sector.
"When we started with the current multi-year model of pricing, we did identify certain categories of costs that were very difficult to predict, even in a year, let alone a three-year period," he said at a media briefing in Johannesburg.
Eskom had suggested to the National Energy Regulator of South Africa (Nersa) a system, used worldwide, of "pass-through costs".
There were certain costs Eskom could not forecast with such accuracy that it could manage them on its own, he said.
"So with those costs, you pass through those costs to the consumer."
Giving as an example the effects of oil prices on the cost of petrol, Maroga said producers could not be expected to take either the risk of the fluctuations in oil prices or those of the currency exchange on their own.
"So there's a formula that if the price of oil changes, the petrol price changes to reflect the pass-through costs. So they're passing the risk of the oil cost to the consumer. And we want to do the same."
At the moment, Eskom adjusted prices annually. Under a multi-year pricing system, it would do so every three years.
Eskom had indicated to Nersa it could not predict with a good measure of accuracy the prices of coal, particularly that bought on-the-spot.
"And we want to pass through those costs to the consumer," said Maroga.
Eskom had seen that it was increasingly using short-term contracts -- rather than those over 30 or 40 years -- "and that is where the volatility of prices happens".
article from M&G here