"Eskom is essential to all of us. If we lose Eskom we might as well kiss the country good-bye," Hogan told Parliament's portfolio committee on public enterprises.

"Can we afford to have electricity so cheap that the electricity provider loses its economic viability? In South Africa we have been very spoilt. The age of cheap electricity is over."

Hogan was responding to warnings from opposition MPs that granting Eskom the 34-percent tariff hike it is seeking would put untenable pressure on the poor.

Public enterprises director general Portia Molefe countered that if the tariff hike application were rejected, Eskom's infrastructure investment programme meant to make sure it can meet power demand, would be at risk.

"If the Eskom is not given the 34 percent increase, we frankly will have a bit of a problem. The entire infrastructure investment programme can come to a standstill."

The comments came as Eskom chief executive Jacob Maroga was defending the application at a hearing of the National Electricity Regulator of South Africa in Pretoria, where the provider was accused of having failed to justify the steep increase.

The company wants to complete a R343-billion capital expansion programme by March 2013, of which R87bn would be spent this financial year

Molefe said it would be irresponsible of the state-owned enterprise to continue to invest in new infrastructure if it did not secure the price hike to fund the programme.

"If 34 percent is not available, they would be trading recklessly."

Molefe said low-income households have been assured that they will get a tariff that is linked to the inflation rate, leaving more affluent South Africans to shoulder most of the burden of higher prices.

"Rich households are going to pay a lot more."

Asked if the middle and upper income households could bear the brunt of the price increase, Molefe responded: "Yes they can, they have to. Times are tough."

South Africa has the second lowest electricity prices in the world and Eskom is expected to ask for further tariff increases for the next three years as it pursues its expansion goals.

Hogan told the committee that almost all the state-owned enterprises in her ministry's stable — which includes troubled Transnet and the loss-making national carrier SAA — were in "financial distress" compounded by the economic downturn.

She said this made it hard to make a clear assessment of their viability but while government would seek to protect its assets, it would also find it more difficult to pump money into companies that were not performing.

"Unfortunately, at the moment we are at a very difficult moment to make a decision one way or another because of the recession.

"The Cabinet and Treasury are asking very hard questions. It is a very difficult environment (in which) to justify this kind of expenditure."

Sapa

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