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SWEETHEART: PREFERENTIAL ESKOM DEALS COST PUBLIC BILLIONS

- Ciaran Ryan

A recent investigation by Open Secrets laid bare the sweetheart deal that allows South32's Hillside aluminium smelter in KwaZulu-Natal to consume about 6% of Eskom's electricity output while paying roughly half the standard tariff.

That figure rises to nearly 9% when South32's Mozal smelter in Mozambique is added.

The extent of the discount enjoyed by South32 is outlined in a negotiated pricing agreement (NPA) recently disclosed by Eskom to Open Secrets.

"The energy consumed by Hillside is equivalent to approximately six large ferrochrome smelters. The consumption is an equivalent of 1,300GWh (gigawatt hours),"" according to the NPA with Eskom.

A calculation by DA spokesperson on electricity and energy Kevin Mileham shows 17.27% of Eskom's electricity is consumed through these NPAs or via international sales.

"What is shocking is that this 17.27% only generates 8.5% of Eskom's revenue from the sale of electricity," he says.

Based on this calculation, a few energy-intensive consumers are paying roughly half of what the rest of the country pays.

While the National Energy Regulator of South Africa (Nersa) recently approved a 24.3% tariff hike over the next three years, South32's NPA guarantees it producer price inflation (running at about 1% this year) plus 1.25%.

Mileham welcomes the recent announcement by Electricity and Energy Minister Kgosientsho Ramokgopa that a review of electricity pricing policy is now a priority.

"We have to look at these NPAs and find out whether they are beneficial for the country as a whole," said Mileham.

Regulated prices charged by government-owned entities such as Eskom and Transnet are running at an average inflation rate of 9.7% — well above the rest of the economy, which is at about 4.5%.