Eskom taking SA “to the edge”- says EIUG

EIUG says review of Eskom strategy necessary….

eiuglogoMike Rossouw, chairman of South Africa’s Energy Intensive User Group (EIUG), says South Africa has reach a “tipping point” in terms of electricity prices and that not enough attention is being given by government to the potential effect of damage to productive sectors of the economy with consequent risk of demand contraction and revenue collapse.

Writing in the Business Day, Rossouw, who represents major groupings of large power consumers such as paper and pulp, motor vehicle and steel manufacturers, called for a review to consider urgently new technology innovation in power sources; the validity of a substantial, expensive and inflexible nuclear programme and much more investigation into alternative fuel options such as gas.

Casualties ahead

EIUG stated it represents some 44% of the total electricity demand in South Africa and Rossouw complained that already the country has had to watch its ferrochrome industry lose its place as world leader to China in the last few years because of “global ineffectiveness on the electricity pricing issue”.

Foundries are shutting down, he said, and he blamed government for its lack of “an holistic approach in dealing with Eskom’s price application.”  He said that South Africa “cannot afford to get this one wrong” and called for NERSA and the minister of energy to take into account an investment and operating climate that should have more regulatory certainty.

”Government through NERSA must extend affordability to industry on power issues and accordingly the state must re-think its position on the effects of Eskom’s 16% hike per year for five years on the economy”, he said.

Looking back

Rossouw noted that the Eskom application will take the price of electricity “to about 128c/kWhr, an overall increase of a huge 540% over a 10-year period to 2017 with prices have already increased by some 200 % since 2007.

“Electricity cannot be treated as a source of revenue nor as a vehicle that allows municipalities to recover their losses”, he said. “10% increase is a figure that is enough to allow Eskom to continue viable operations”.

Calling for less “bulking up of Eskom’s balance sheet to meet rating agency expectations”, Rossouw stated that Eskom’s MYPD(3) application to NERSA contains only “limited disclosure” but, nevertheless, NERSA, he says, does in fact have access to the full story and maintained that the regulator should react by balancing affordability against the Eskom capital expansion programme.

In the article, he repeated the call that much that much more attention should be given by DOE to what appears to be a “highly inflexible nuclear power generation programme” and “more investigation carried out into alternative fuel options such as gas.”

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