HomeIndustry SectorsFinance and PolicyEskom pilots sales incentive for large power users

Eskom pilots sales incentive for large power users

South African power utility Eskom has confirmed that it will be discussing efforts to stablise sales to electricity-intensive industries with nine large industrial customers.

Initially, to be implemented as a pilot programme, the utility aims to stimulate “sales of up to 5TWh and generate revenue of R3-billion over two years”.

Speaking to Engineering News, Eskom confirmed that the customers are predominantly in the mining and associated metals industries.

Eskom has faced a reduction in energy-intensive customers over the past decade due to load shedding and tariff increases.

This has resulted in sales declining from “90TWh in 2007/8 to 75TWh in 2017/18, a fall of nearly 17%. Over the same period, national sales have declined 2%, from 214.8TWh to 210.3TWh over 10 years, with key industrial customers currently comprising 36% of national sales, having represented 42% in 2007/8”.

Eskom is going to be incentivising large customers to increase “their base sales,” but tariffs will remain unchanged. Read more: Strike season in South Africa delivers loadshedding

“The pilot programme is a standard offering to all customers whose current consumption is more than 100GWh a year. The volume of incentivised incremental sales on offer is limited and applications are evaluated against set criteria and finalised through a standardised contractual agreement,” Eskom told Engineering News.

It is unclear what the ultimate impact on revenue will be, but success will mean Eskom will consider making this a permanent offering. If the pilot gets to this stage, Eskom will engage in further discussion and a formal engagement with the National Energy Regulator of South Africa.

Eskom also revealed that it is investigating an ‘Industry Tariff’ saying: “The case for it rests on the fact that electricity prices contribute significantly to the competitiveness of these industries, coupled with the fact that the closure or cutback of such industries negatively impacts Eskom and the South African economy as these industries also support upstream and downstream industries.”

Should this tariff go ahead, it will result in more cost-reflective tariffs. The intention is to look at the “explicit and implicit subsidies, cross-subsidies, levies, surcharges and special taxes” currently applied, which can account for as much as 12% of the total tariff.

“The proposed new tariff is still being consulted on and developed and the optimal mechanism for implementation is to be decided. In principle, the new tariff could also apply to qualifying customers within municipal supply areas; however appropriate agreements would be required to implement this,” Eskom explained.

“The Industry Tariff is at the early stage of development, but we are engaging with the inter-governmental team established by the Department of Public Enterprises.”

This article was published on our sister website, Smart Energy International (www.smart-energy.com)

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.