Consumers could pay for underperformance of Eskom mines

Johannesburg - South African electricity users could soon pay the price for the alleged under performance of coal mines supplying coal to Eskom.

Eskom’s Regulatory Clearing Account (RCA) application to the National Energy Regulator of South Africa (Nersa) includes R2bn which the power utility said was for “coal burn”.

Eskom senior general manager for primary energy Vusi Mboweni said, as a result of the under performance of coal mines meant to supply coal to Eskom’s power stations, the utility had to buy the coal from other suppliers, often at a higher cost.

In its application, Eskom has asked Nersa to approve these and other costs incurred in the 2013/2014 financial year. In total, Eskom wants to recover R22.8bn.

Eskom group executive for generation Matshela Koko said the coal mines had not met the required production levels.

To supplement their production, Eskom usually bought coal on the spot market. The cost per ton as well as the handling costs of the supplementary coal were often high, he said.

As some of the coal contracts with the miners are coming to an end, Koko said the utility would “bargain hard” because of the concerns about the companies’ alleged under performance.

Koko also questioned the appropriateness of the long-term coal contracts with the tied collieries. “They used to work for us,” he said.

For many years, Eskom power stations got coal from nearby coal mines. However, recently, Eskom has voiced its displeasure with the performance of the mines.

The utility has raised the ire of National Union of Mineworkers (NUM) after it became clear that it would not enter into a new contract with Exxaro’s Arnot coal mine which supplies its Arnot power station in Mpumalanga.

Eskom earlier this year locked horns with Glencore’s Optimum colliery over a coal supply contract. Optimum supplies coal to Eskom’s Hendrina power station, also in Mpumalanga.