Londiwe Buthelezi
The decision to not allow Eskom to continue with its electricity buy-back programme would leave residential users in the dark first, should there be a recurrence of blackouts.
Blackouts became a concern once again after the National Energy Regulator of South Africa (Nersa) told Parliament on Wednesday that it had not made provision for the power utility to continue with the power buy-back programme in the next five years of the third multiyear price determination.
The utility had applied for a provision of R8 billion to buy back power during the third multiyear price determination and was relying on buying back power from its big industrial customers when faced with capacity constraints during peak periods.
Cornelis van der Waal, an electricity analyst programme manager at Frost & Sullivan, said that although the buy-back programme was not ideal for the country, because it reduced productivity in the sectors that were crucial to create employment, it made sense for Eskom to run the programme.
“We are all aware that the buy-back programme is crucial when we face capacity crisis. So if we are not making provision for it, we have a problem,” he said.
Peggy Drodskie, the chief operating officer of the SA Chamber of Commerce and Industry, said if power shortages worsened as a result, commerce would not be materially affected because most businesses operated during the day, when there was lower demand.
“If you don’t have that cushion, household users would be the ones affected should there be blackouts,” she said.
Peak demand is in the evenings, when residential customers return home – a period in which Eskom has been battling to manage demand.
Last week, Energy Minister Dipuo Peters said South Africans had to cut between 10 percent and 15 percent more if they wanted to avoid a repeat of the 2008 blackouts.
Drodskie said intensive users had reduced power consumption as far as they could since 2008. With beneficiation being one of the key factors in the national objective to create jobs, South Africa needed to keep smelters and other mining operations productive, she said.
It was reported that all smelters in the country consumed as much as 5 percent of Eskom’s electricity.
Van der Waal said although smelters and mining companies had taken steps to decrease electricity consumption, they could look further at process optimisation. But commercial and residential customers could reduce their consumption further.
Kevin Hustler, the chief executive of the Nelson Mandela Bay Business Chamber, said some businesses had saved 20 percent and more of their usage before 2008.
He said that with Eskom selling only 0.24 percent more electricity than it did in 2008, the grid capacity should cope with the current demand.
He said in Port Elizabeth high energy users paid the same tariff as other users. “Preferential rates given to Eskom customers which are below the generation cost is a cause for concern, as one or two customers in the country are benefiting at a lower tariff.”
Eskom has also been making use of interruption provisions in its special pricing agreement with BHP Billiton to manage a tight system when needed, which spokeswoman Hilary Joffe said was done without any compensation to BHP Billiton.
Eskom could interrupt power supply to the aluminium smelters in KwaZulu-Natal and Mozambique for up to two hours a week.
But as Eskom was looking to renegotiate that contract, this arrangement could change, leaving the utility with no option but to cut power supply or buy back power funded from its own balance sheet.
“But Eskom has agreements with many customers to which they sell electricity at slightly preferable rates… it is global practice. So they will be the first to be cut off in crisis,” Van der Waal said.