South Africa's Eskom says tariff hike could earn it nearly $3 bln

CAPE TOWN (Reuters) - South Africa's cash-strapped power utility Eskom, could earn nearly 40 billion rand ($3 billion) if a 25.3 percent tariff increase it has requested is approved, a spokesman said on Tuesday.

Eskom, which is battling the worst power supply shortages in Africa's most advanced economy since 2008, said it would also apply for other single-digit hikes in the next two financial years, spokesman Khulu Phasiwe told reporters.

The National Energy Regulator of South Africa (NERSA) said it will meet on Wednesday to discuss whether to grant Eskom's request for a hike in electricity prices from July this year.

The utility says the rise is meant to help recoup costs incurred while running gas turbines to cope with power demand.

"The bulk of it is going to purchase diesel and then the remainder will be used for the purchase of extra electricity from the independent power producers,” Phasiwe said of the money Eskom expects to earn after the increase.

The increase requested by Eskom is made up of the 12.69 percent increase NERSA granted the utility in March this year, plus a 10.1 percent for the open-cycle gas turbines and the short-term power purchase programme as well as a 2.51 percent increase in the environmental levy.

The amount would include 7 billion rand NERSA had awarded Eskom after the company spent 10 billion rand buying diesel last year, more than three times the amount it initially budgeted.

The troubled utility has resorted to almost daily power cuts as it battles to meet its daily demand of about 30,000 megawatts and has been forced to resort to diesel-powered turbines to supplement its ailing coal-fired plants.

Eskom has until Friday to amend its pricing structure for the current financial year and wants the increases to be reflected in municipal budgets for 2015/2016 (June-July), which are due to be finalised by end-May. Eskom sells the bulk of its power to municipalities across the country.

"Since there is this deadline of 15 May for Eskom, the possibilities are that the energy regulator will have to come up with a decision in terms of how this is going to be treated, this week," said Charles Hlebelela, a Nersa spokesman.

Construction at Eskom's much-delayed Medupi power station would resume on Monday, Phasiwe said. Thousands of workers at the plant have been on strike for nearly seven weeks, protesting against poor living conditions and demanding better pay.