Press Release: Eskom’s Load Shedding and Industrial Power Usage
Earthlife Africa Jhb
11th of October 2007
Over the past few days, Eskom has been engaged in load shedding and encouraging domestic users to conserve electricity. In the process, a few key facts have been conveniently omitted.
The greatest users of electricity are not domestic users, who account for only 17% of electricity users. The greatest users of electricity are industrial factories; 29 companies consume 40% of all electricity. Furthermore, the demands on electricity supply up to 2050, according to the Department of Minerals and Energy figure, are primarily due to industrial demand.
Despite being the most-intensive users of electricity, industry pays half the tariff that domestic users do (an average of 29c per kwh compared to an average of 17c per kwh). This has an obvious effect on Eskom’s ability to generate, transmit and distribute electricity.
Furthermore, Eskom and the Government have committed themselves to large-scale supply of electricity to individual and foreign companies at reduced tariffs; this at a time when Eskom struggles to supply citizens with electricity. Thirty percent of all South Africans are still not connected to the electricity grid.
An example of how Eskom and the Government are favouring foreign companies over the interests of South African households is the electricity supply deal to the Canadian aluminium-smelting firm Alcan.
For the past two years, Earthlife Africa Jhb has consistently called upon the Department of Trade and Industry (DTI), the Department of Public Enterprises, Eskom and Alcan to disclose the details of electricity sales to Alcan for its proposed smelter. Both the South African Government and Alcan have hidden behind a profoundly anti-democratic clause in the Developmental Electricity Pricing Programme (DEPP). Alcan is the first foreign company to benefit from the DEPP, and has signed a 25-year deal for 1350MW supply of electricity. This represents about 4% of the entire country’s usage.
What is the DEPP? Essentially, the DEPP provides for uniquely discounted electricity tariffs for foreign industries that are heavy consumers of electricity (over 50MW) in South Africa. In return for investment in South Africa, the DEPP will ensure that electricity tariffs are internationally competitive (our nearest competitor is Australia, which sells electricity at US$0.053 per kwh and is 30% more expensive) and that the industry in question can achieve an profitable internal rate of return; i.e. if electricity is a major overhead (such as in aluminum smelting), it the tariff will be low enough to ensure profit.
This is a significant incentive for heavy industry to invest in South Africa and is supposed to provide significant jobs. However, what it really does is commit Eskom to tariffs for heavy industry at a rate lower (or, at most, on par with the next cheapest supplier of electricity) than anywhere else. It is, in effective, a subsidy for foreign industries, similar to a tax break or import duty waiver.
The most worrying factor about the DEPP is the “built-in” secrecy clause. Eskom is a public enterprise, ultimately owned by the citizenry at large. However, the DEPP guidelines ensure that any contracts signed under the DEPP are to remain secret. This is profoundly anti-democratic. The DEPP states (clause 12.1):
All officials, employees or members of the Department, the adjudication committee, NERSA, Eskom and non Eskom distributors shall regard as confidential all technical information, records, particularly any strategic commercial information and all knowledge that pertains to any project that applied for benefits in terms of DEPP, whether such information is recorded on paper or in an electronic manner.
The very next clause (12.2) in the guidelines bounds individuals with knowledge about the contracts to silence for the rest of their lives.
If the DEPP is a method for promoting growth and development in South Africa, why then the secrecy? Why shouldn’t this be in the public domain? This clause gives foreign corporations like Alcan the right to build electricity-intensive industrial plant in South Africa, get electricity on favourable terms in relation to their expected rate of return, and not to have to tell the country at large what rate they purchased electricity from the South African state. Further, this clause seems at odds with the spirit of the Promotion of Access to Information Act, through a pre-emptive strike against the releasing of information.
The DEPP deal with Alcan means that the citizens of this country won’t know the answers to the following questions:
* What is the price of electricity agreed upon by Alcan and Eskom?
* What are the conditions of supply of electricity?
* Will the price paid to Eskom cover the indirect costs of smelter? For example, the environmental group TWIG has calculated that the indirect costs of harm to the environment based on Eskom CO2 emissions to supply the smelter with electricity would be R6.4 billion.
The question that should be asked when Eskom turns off the lights is; why, if Eskom can’t supply electricity to the citizens of this country, is it offering foreign companies large amounts of power at reduced tariffs? Must individuals and small businesses suffer so that large industries can be assured profit?