Johannesburg - The Chamber of Mines and the Steel and Engineering Industries Federation of Southern Africa (Seifsa) – two of South Africa’s largest electricity consumers – have come out in opposition to Eskom’s application for the recovery of the R22.8 billion the utility claims it lost during the past financial year.
The two organisations urged the National Energy Regulator of SA (Nersa) to reject the application as it was not affordable in the current economic climate.
The chamber said Eskom’s application for the recovery of R11.7bn in lost revenue was mainly due to lower sales volumes. Its members consume 15 percent of electricity sold in South Africa.
The chamber’s techno-economic adviser, Dick Kruger, blamed Eskom’s poor maintenance and delayed commissioning as being responsible for the increase in costs associated with the open cycle gas turbine (OCGT) plants.
“The chamber does not support the recovery of this cost that could have been avoided by better management,” Kruger told Nersa’s public hearings on Eskom’s application in Midrand yesterday.
“Customers who have lost revenue are now required to compensate Eskom in addition to their own losses.”
OCGT
Last month, Eskom submitted a regulatory clearing account application to Nersa for costs related to the difference between the anticipated revenue and actual revenue, the running of the OCGTs, as well as primary energy and coal.
Eskom chief financial officer Anoj Singh told the hearings that the utility had used the OCGT plants in order to avoid load shedding.
“The impact to the economy if there was load shedding would have been R25bn, which is bigger than the entire claim,” Singh said.
Seifsa, which represents companies in the metals and engineering industries, said an approval of the application for further tariff increases would be a critical setback for the sector’s competitiveness and would contribute to further job losses in the industry.
Seifsa chief economist Henk Langenhoven said the increase would postpone the sector’s recovery even further.
“Seifsa is not in favour of any increases; but if an increase is absolutely necessary, a much lower percentage increase should be proposed,” he said.
Langenhoven said the performance of the mining, construction, automotive, metals and engineering sectors, which collectively contribute almost 20 percent of South Africa’s gross domestic product, had deteriorated significantly since June and the outlook for the next two years remained dire.
“Exorbitant electricity price increases will have a crippling effect on these sectors in general and the already declining metals and engineering sector, in particular.
“The metals and engineering sector exports 60 percent of its production and international competitiveness is key to survival; this (potential) electricity cost increase will erode it further,” he said.
Investec chief economist Annabel Bishop said electricity consumption and production fell by 1.5 percent year on year and 0.3 percent year on year in December, respectively and by 1.5 percent and 2 percent year on year, respectively for 2015.
Bishop warned that any further increase in the electricity tariff would have far reaching implications for the economy as a whole.
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