Eskom ordered to give up secret

Independent Newspapers

File photo: Dumisani Sibeko

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Durban -  Eskom is expected to come under growing public pressure in the next few days to reduce soaring electricity prices for ordinary people by putting an end to decades of secret discount prices to the power-guzzling BHP Billiton aluminium smelters.

This follows a landmark decision by the Supreme Court of Appeal (SCA) on Friday compelling Eskom to disclose some of its “confidential” bargain-basement price agreements that have remained hidden despite the power crisis, blackouts and rising tariffs.

Ordinary Durban residential consumers are paying just over R1 for a kilowatt hour of electricity, while Australian-based BHP Billiton has refused to disclose how much it is charged for power, despite reports that it may be paying as little as 8c to 12c/kWh.

Eskom has also refused to release the figures, but the court ruled that the state power utility was now obliged to disclose these costs as ordinary consumers “undoubtedly have a public interest” in seeing how much they were paying for power compared with BHP Billiton.

The case against Eskom and BHP Billiton was bought by senior Media24 journalist Jan de Lange under the Promotion of Access to Information Act in 2009 after Eskom refused to release the terms of their tariff agreements.

De Lange argued that if Billiton had been forced to pay reasonable tariffs, South Africa might not be faced with such a severe power crisis and rising electricity prices.

Eskom supplies power at a discounted rate to the two electricity-intensive aluminium smelters at Richards Bay and Maputo, whose joint power consumption equals almost 6 percent of the total power consumed by Eskom customers.

Referring to a series of confidential pricing agreements between BHP and Eskom and dating back to the early 1990s, De Lange said: “It is clear Billiton has profited substantially at the expense of Eskom and other electricity consumers by virtue of these contracts.”

De Lange noted that the low prices paid by BHP also appeared to be wholly or partially responsible for Eskom’s R3.2 billion operating loss in March 2009 and a projected R9.5bn loss due to “embedded derivatives”, a term understood to refer to Eskom’s secret deal with BHP.

De Lange told The Mercury although Eskom was discussing how and when the information would be released, he expected this would be done “in the next day or two” unless BHP chose to contest the ruling in the Constitutional Court.

Eskom did not respond to questions on when details of the secret tariffs would be published. The National Energy Regulator failed to respond to queries on whether BHP tariffs would be renegotiated.

BHP said it accepted the SCA’s decision.

It emphasised that it regarded the secret contracts to be “legally binding”, indicating it remained opposed to any substantial revision of the tariff structure into which Eskom is locked for another15 years in Richards Bay.

“It is globally accepted that sanctity of contracts is an important premise of doing business,” it said.

“The construction or refurbishment of the Bayside and Hillside smelters at a cost of more than R60bn followed strategic decisions by successive South African governments between 1970 and 2003 to encourage large-scale industrial projects by making surplus electricity capacity available at internationally competitive rates.”

The court noted that BHP executive Konrad von Szczepanski had testified that electricity prices in the global aluminium business were a closely guarded secret and could cause harm to the company if they fell into a competitor’s hands.

SCA Deputy President Kenneth Mthiyane said in a majority decision that this argument appeared to be false or substantially overstated, especially considering Billiton had concluded the agreement with a state entity. - The Mercury