Government to look at administered electricity prices for key industries

Mineral resources and energy minister Gwede Mantashe. Picture: GCIS
Mineral resources and energy minister Gwede Mantashe. Picture: GCIS

The government is looking to unroll administered electricity prices for key parts of the economy, including mining, manufacturing and furnaces smelting minerals, Gwede Mantashe, mineral resources and energy minister, has said.

The department is calling all coal producers together for a meeting on September 27 to discuss the best possible price for both the miners and state-owned power utility Eskom, creating an index price for coal, Mantashe said at a media briefing on Friday.

The much anticipated Integrated Resources Plan (IRP), which sets out the government’s plans for SA’s power sources, could be released as early as Wednesday, Mantashe said. 

The plan will set out how reliant SA will remain on coal-fired electricity in the coming years and the role alternative sources of energy will play, including nuclear, solar and other renewables.

Mantashe has used various public platforms to stress that SA will not suddenly move away from coal, given its abundant resources of the fossil fuel. On Friday, he again said SA had to deploy clean-coal technologies as part of its energy mix.

As part of the discussions, it will call for the creation of administered prices at which electricity will be supplied to key industries that are shedding jobs and closing doors because of high electricity tariffs, Mantashe said.

The government will not impose a price on coal producers, but wants a lower general price for Eskom. It wants miners to make enough money to be profitable and to grow, he said. Prices higer than R550 a tonne of coal for Eskom is too expensive and he wants delegates at the talks to explore a price closer to R400/R450 a tonne, with a mechanism built in for annual increases, he said

“We will not go to coal producers and say sell your coal below production cost, but at what is a reasonable price. We will not index the price of coal unilaterally,” he said.

Minerals Council SA, the mining industry’s representative body, has said electricity prices for mines, one of the major consumers of electricity, has increased by 523% since 2006 and faces another 30% hike over the next three years.

“The reality of the matter is that we need to reduce the price of electricity. It is killing manufacturing, mining and furnaces,” he said, pointing to countries such as China smelting large quantities of SA chrome and manganese ore because it had become too expensive to do so in SA.

Debt-laden Eskom, which can barely afford the interest on its R450bn loans, faces being broken up into two or three parts by the government to better manage its debt. Mantashe cautioned that unbundling Eskom would not automatically lead to lower electricity prices.

Business has called Eskom, with its parlous financial state, its ageing power plants and cost increases, the single most serious crisis facing SA. With many of SA’s power stations coming to the end of their lives in coming decades, Mantashe said the government has to avoid its recent mistake of not building new plants in good time. “If we do not rebuild and replace these power stations, we will run into problems.” 

seccombea@businesslive.co.za

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