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Tax BHP Billiton on underpriced electricity

08 April 2013, 09:00
Tax BHP Billiton on underpriced electricity

BHP Billiton is receiving electricity at preferential rates in South Africa. If the preferential rates would be higher than the production costs it would be fair, however it is far below

Although the negotiated price is legal and binding, it is not fair to the other users of Eskom power who must now pay inflated prices for the product.

Since BHP Billiton does not want to negotiate a fair price for electricity, I believe that leaves South Africa with no other alternative than to tax all users (not only BHP Billiton) on underpriced electricity.
The goverment should slap an 80% tax on all electricity sold at prices below production price.

Taxing underpriced electricity is legal as they receive a benefit which is not taxed. In this way the agreement between Eskom and BHP Billiton can be honoured but the people of South Africa knows that BHP Billiton wil pay a fair price for the electricity they consume.

More details about the deals can be found at

Below is an extract from that web page

Eskom, which needs to generate cash to build new power stations to meet rising demand, has been trying to renegotiate the long-term preferential deals since 2009.

It has now asked the energy regulator to review the contracts, which are linked to the price of aluminium and the rand/dollar exchange rate and which contributed in large part to Eskom's annual loss of R9.7bn in 2009.

In a letter to the Business Day newspaper, BHP Billiton South Africa chairperson Xolani Mkhwanazi said the contracts were negotiated in good faith on a risk-sharing basis and followed recognised international models.

"BHP Billiton expects our contracts to be honoured," he said.

The contracts with BHP, which consumes 9% of Eskom's power output, date from the early 1990s when there was abundant supply in South Africa, the legacy of a government policy of underpricing power to attract industry.

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