Eskom’s group CEO has flagged serious flaws in negotiated electricity pricing discounts for energy-intensive firms, saying they shift the real costs onto households and the utility.
Speaking at Business Day Spotlight, a podcast that has hosted stalwarts such as Sasol CEO Simon Baloyi, Dan Marokane said the next generation preferential pricing policy had to be explicit about who it protected, which industries qualified and how Eskom remained financially viable.
“I’ll give you what’s there on the table now. That’s what we call negotiated pricing agreements.… And they’re essentially priced at a discount to standard tariffs. The bulk of the revenue is socialised among the rest of your customer base. Should this be the case going forward? Maybe not,” Marokane said.
“Should it be there in a different way? Probably that’s what will come out. And the minister has said repeatedly he will take input from all sectors of society in shaping the next electricity pricing policy.
“What we’ll end up with will be something that reflects interventions to alleviate the pain for the poor, for the economy and for the sustainability of the utility.”
Marokane’s comments slot into the debate about how best to support SA’s chrome industry. SA possesses more than 70% of the world’s chrome ore reserves, but most of SA’s output is shipped overseas unprocessed, as sharply higher electricity tariffs undermine the commercial logic of smelting it into a high-value ferrochrome.
Negotiated pricing agreements (NPAs) have long insulated a few large users from full cost-reflective tariffs. Those deals were born of crisis management, keeping plants online and protecting jobs. But the missing revenue from NPAs is recouped from other customer segments such as households, small businesses and other industries.
Marokane said the NPAs had to have a clear cost-benefit analysis. Eskom and Nersa have signalled that the future NPAs will be reviewed as part of a broader electricity pricing reform package due next year.
“I’m very happy that the minister is leading this process of relooking at the pricing policy, and its approach and objectives. It will deal with protecting the indigent and stimulating economic growth in areas we agree we need to champion as a country,” Marokane said, referring to electricity minister Kgosientsho Ramokgopa.
“But you also have to have a measurable benefit if you’re going to negotiate it. There has to be something that is there for the country.”
Earlier this year, the government proposed a 25% tax on chrome exports, betting that the levy would nudge miners to divert output to local smelters, revive idle ferrochrome plants and stimulate beneficiation. Still, the tax would be useless if the industry cannot afford to flip the switch.
In a wide-ranging interview, Marokane also called for clear, well-thought-out rules in the fast-changing electricity generation market that will expose Eskom to meaningful competition.
He said the reforms in the sector were still unclear on who the supplier of last resort was, how to protect the poor and how that capacity was remunerated.
“These are the things that previously we didn’t have to think about in SA, and now we need to do so,” he said, adding that when the sun wasn’t shining, many rooftops drew from the grid.
“That grid capacity, we’re maintaining it … we’re battering the country … Somebody has to pay for that capacity.”
