The Public Enterprises Minister Barbara Hogan has warned that holding down electricity prices now will result in even higher prices in the near future.

Speaking at a media briefing in Parliament on Tuesday, Hogan pointed out that should the 34 percent increase in power tariffs applied for by Eskom not be granted, a good deal of volatility will be injected into the tariff structure.

She drew attention to what happened when, in March, the regulator cut the rates to be charged by Transnet for its petrol pipeline by 10.4 percent, saying that the costs of building a new pipeline cannot be in included in the tariff. The new multi products pipeline will quadruple the pipeline assets and will result in a spike of R12-billion when the costs can be factored in.

The actual capital expenditure may not be included in operating expenses, although interest on the borrowing necessary may be. But it cannot appear as an operating expense until the interest has begun to be paid.

But National Treasury has relented to some extent and has allowed that in order to mitigate the risk of such spikes in fuel prices, the Energy Department will be able to institute a 'security of supply' levy on liquid fuel, to meet the funding problems of the new pipeline.

The national energy regulator is expected to announce his decision on the Eskom tariff later this week.

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