[DEBATE] : (Fwd) ANCrony electric capitalism
pbond at mail.ngo.za
Wed Feb 6 04:14:00 GMT 2008
(Ok, does anyone still have any last remaining doubts about the capacity
of the regime to become 'developmental' now?)
06 February 2008
Cheaper power lure for foreign investors
Mathabo le Roux
Trade and Industry Correspondent
DESPITE SA’s power supply crunch, the government is persisting with a
scheme to attract electricity-intensive investments to SA by offering
electricity at much cheaper rates than households and industry pay.
Existing users will subsidise cheaper power for beneficiaries of the
scheme through higher tariffs, and will also be rationed to free up
supply for new users.
The commitment to reallocate power is probably an attempt to reassure
new investors that they will get electricity but it also seems to be a
scramble to prevent Eskom from paying penalties to investors for breach
At the launch of the national energy efficiency campaign yesterday,
Minerals and Energy Minister Buyelwa Sonjica confirmed that the state
would continue with the developmental electricity pricing programme
(DEPP), saying SA needed to attract investment.
“You still need these investments. You have to make sure the country is
competitive, so (cheap) electricity has been used to make the country
attractive for investment,” Sonjica said.
“Part of the plan of energy efficiency is to accommodate some of these
Sonjica estimated that households could save 5 669MW by using power more
efficiently. The state seeks to achieve power savings from households
and companies of 15%- 20%.
Penalties on households that breach savings targets would be introduced
within a year, said the deputy director-general of electricity and
nuclear energy, Nelisiwe Magubane. Larger corporate users of power face
immediate penalties if their consumption exceeds a set target,
determined by their average consumption over the 12 months beginning in
Magubane said power saved through rationing would be passed on to the
new investors under the DEPP.
The DEPP, developed jointly by Eskom and the departments of public
enterprises and trade and industry, is an incentive to attract
industrial investment to SA through low power tariffs.
The rates, which are confidential, are thought to be lower than current
industrial rates. One of the most recent beneficiaries is Alcan (now
Alcan Rio Tinto) for the aluminium smelter it will build at Coega.
Aluminium smelting uses huge amounts of electricity. The Alcan smelter
will consume 1 355MW at full capacity — almost 4% of SA’s supply.
SA’s electricity rates have long been the lowest in the world, and Alcan
committed to the project primarily because of the promise of cheap
power. But the situation will change drastically, with power prices set
to double in the next five years to help fund Eskom’s mammoth programme
to expand generating capacity.
Persisting with the DEPP means the government will promote SA abroad as
an investment destination offering cheap power, even as SA’s power
supplies become scarcer and dearer.
Economist Matthew Stern said the DEPP was an insult to consumers because
they were expected to pay more for power and use less of it while the
state refused to divulge pricing agreements with preferred consumers.
Trade and industry’s Nimrod Zalk said the department still needed
clarity from the public enterprises department on the status of the
DEPP. But he said that contractual commitments meant the programme could
not be revisited “retrospectively”.
Eskom suggested last month that the Coega smelter might have to be put
on hold because of the power reserve margin deficit. Eskom reached its
price agreement with Alcan in late 2006.
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