The Congress of South African Trade Unions has slammed Eskom's request for a 34 percent nominal increase.

It has urged the National Energy Regulator of South Africa to reject the application.

"Such a massive increase would inflict misery on thousands of poor households, especially as there is not yet a tariff policy that protects poor consumers, many of who would have to give up using electricity at all, faced with such a rise in their cost of living," Cosatu spokesperson Patrick Craven said in a statement on Friday.

"A 34 percent increase would also hit hundreds of small and medium businesses who are already struggling with the effects of the global financial crisis," he said.

Recession catalyst

"Many might be forced to close their doors and retrench workers, further exacerbating a trend towards recession which is already under way."

Nersa said on Friday that Eskom had applied for a tariff increase as an "interim" move pending finalisation of the funding model for its capital expansion programme.

"The funding model seeks to balance the need for equity injection from the shareholder (government), borrowings from investors, and tariff increases.

"Eskom is applying for an interim price increase to maintain a healthy cash flow situation in the short term while allowing an opportunity for the funding model to be finalised," it said.

Eskom spokesperson Fani Zulu said the utility intended applying for another price rise later in the year, once a new three-year funding model, which took into account its capital expansion programme, had been developed and implemented.

"Cosatu reiterates that, while it is not opposed to an increase that just reflects genuine increase in running costs, which should correspond to the current rate of inflation of 8.5 percent, consumers should not have to shoulder Eskom's capital cost of building new generating capacity," said Craven.

"This must come from government, who failed to provide these funds in the late 1990s despite Eskom's warning that there would be a crisis if they were not given the money at that time," he said.

Eskom introduced deliberate blackouts of homes and businesses last year to help alleviate an electricity crisis.

The government brought forward the disbursement of a R60-billion deeply subordinated loan to Eskom over five years to three annual instalments of R10-billion, R30-billion, and R20 billion.

However, Nersa refused to give Eskom the 53 percent, or 60 percent nominal, increase it wanted, instead granting a 13.3 percent increase on top of a 14.2 percent hike approved in December.

At the time, Nersa projected price increases of 20 to 25 percent a year for the next three years - if the economic conditions in May 2008 persisted.

Nersa has invited public comments on Eskom's latest application -available on its website www.nersa.org.za - before June 2 and oral representation at public hearings on June 8 and 9.

It intends making a decision on the request on June 25.

Silent on funding

Zulu said Eskom's existing pricing model was "silent" on the funding of capital expansion programmes.

In the past, the power company had been able to bear the burden itself, but it was about to embark on much more costly, multi-billion rand programmes.

He said Eskom had consulted with the government on a new funding model, but believed the whole country should be involved in the dialogue.

There was already "strong consensus" that Eskom's capital expansion programme was a "critical" to the country's economic development and that a "holistic and integrated" solution was needed.

"You can't talk about growth and development without giving the necessary power supply."

Craven said labour would continue to discuss the issue in the National Economic Development and Labour Council and would strive to reach an agreement with the government and business.

However, he said it could not rule out mass action should an excessive tariff increase be imposed regardless.