/ 6 October 2009

Eskom to give the poor more free power

Eskom wants to increase the basic free electricity allocation to poor households from 50 kilowatts to between 70 and 100 kilowatts next year, chief executive Jacob Maroga said on Tuesday.

”The current discussion is increasing it to 70 or 100 kilowatt,” Maroga said.

He told reporters in Cape Town the struggling electricity supplier had included this proposal in its tariff increase application for next year, which was submitted to the National Electricity Regulator of South Africa (Nersa) at the end of September.

Maroga declined to divulge the price increase Eskom had asked Nersa to approve for next year, saying this would only become public once the country’s 283 municipalities had commented on the application.

Media reports have said Eskom applied for a 40% increase, after putting up the power price by 31,7% this year.

The chairperson of Parliament’s portfolio committee on public enterprises, Vytjie Mentor, told Maroga on Tuesday she would not allow him to put a figure to members of Parliament as it ”can create consternation or whatever in the public”.

Maroga told the committee that Eskom had begun the process of renegotiating long-term derivative-based contracts with clients with aluminium smelters to untie its supply price from commodity prices.

So-called embedded derivatives accounted for most of Eskom’s R9,7-billion operating loss last year as aluminium prices plunged during the global economic crisis.

Maroga would not comment on how these clients, notably mining company BHP Billiton, had reacted to its plans to rewrite long-standing deals.

”We stated our intention — we want to relook at the contract. It is still too early to make any comment,” he said.

Public Enterprises Minister Barbara Hogan said last month she believed the contracts could be restructured, telling reporters: ”You can always negotiate again.”

Maroga added, however, that the process was a delicate one as the company did not want to lose credibility with clients.

He said Eskom currently had spare capacity of an average 10% and coal stockpiles for about 42 days.

Ideally, the company needed spare capacity of at least 15% but could only hope to achieve this in five years’ time, he said. — Sapa