SA’s electricity system ‘at significant risk’

2010-02-02 14:47

THE country’s electricity system is at significant risk, Paul van

Niekerk of the Energy Intensive User Group said today.

He was addressing an energy dialogue hosted by the South African

Chamber of Commerce and Industry.

Van Niekerk said the group had only 38 members, “but these are huge

companies that make up for 40% of total electricity sales in SA and these groups

employ a lot of people”.

He said they were worried about security of supply from 2010 to

2015 and that South Africa’s gross domestic product was at stake.

“If the cost of electricity becomes too great then there will be

vast repercussions.”

Van Niekerk said the first integrated resource plan had offered

little comfort.

“We are pleased to hear from Energy Minister Dipuo Peters that

there will now be consultation and we offer our services,” he said.

Security of supply was the country’s biggest problem and generation

performance had to be enhanced.

“Distribution and its reliability is a worry, as is the ability to

deal with load-shedding.

“I am pleased that Minister Peters has indicated her support for

the regional electricity distribution services.”

According to Van Niekerk, a national contingency plan needed to be

developed as the Medupi power station would take longer than thought to


He suggested that sources of non-Eskom generation needed to be


“Three thousand megawatts of independent supply need to be acquired

by the end of 2010.”

Van Niekerk said the issue of an independent buyer and market

operator needed to be studied and Eskom would have to offer grid access “at a

reasonable rate”.

He said the National Energy Regulator of South Africa (Nersa), the

body currently reviewing Eskom’s tariff application, had to challenge certain

aspects of the electricity parastatal’s strategy.

“Nersa must challenge Eskom’s cost of capital, its depreciation

methodology, its primary energy costs, operating costs and also capital

expenditure, because Medupi and Kusile are too expensive.”

He said that the group had also concluded that Eskom’s medium-term

supply and demand forecast was too low.

Van Niekerk said that the 35% hike every year for three years

proposed by Eskom was “too high” and would lead to joblessness.

“Any plan must reduce the rate of Eskom’s return on investment and

also alternatives to tariff increases must be investigated such as the selling

of bonds and even some assets.”


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