SAfrica's Eskom prefers to phase in tariff increases

CAPE TOWN, Oct 7 (Reuters) - South Africa's power utility Eskom [ESCJ.UL] has recommended a gradual increase in electricity tariffs as the best option to protect the economy and customers, its new tariff hike application said. The proposal was one of two options submitted by Eskom and is based on an average yearly tariff increase of 22 cents per kilowatt hour over three years, up from 33 cents. "Eskom recommends that the smoothing option be considered as it mitigates the impact of price increases on customers and the economy and it provides for a more sustainable long-term solution," Eskom said in its application, a copy of which was obtained by Reuters on Wednesday. Eskom has said it requires the multi-year tariff increases, which cover the period 2010/11 to 2012/13, to help fund an ambitious 385 billion rand ($51.76 billion) expansion plan to meet fast-rising demand in Africa's biggest economy. South Africa has been cushioned by one of the world's cheapest electricity tariffs, but the utility and the energy industry agree that the price of electricity will have to rise substantially to boost investment in the sector, and help pay for Eskom's power generation programme.