'SA electricity system at risk'

Johannesburg - The country's electricity system is at significant risk, Paul van Niekerk of the Energy Intensive User Group (EIUG) said on Tuesday.

He was addressing an Energy Dialogue in Johannesburg hosted by the South African Chamber of Commerce and Industry.

Van Niekerk said the EIUG 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 the EIUG was 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, there will be vast repercussions."

Van Niekerk said the first integrated resource plan (IRP) had offered little comfort to the EUIG.

"We are pleased to hear from [Energy Minister Dipuo Peters] here today 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.

Contingency plan

"I am pleased that Minister Peters has indicated her support for the regional electricity distribution services (REDS)."

According to Van Niekerk, a national contingency plan needed to be developed as the Medupi power station would take longer than thought to complete.

"We need contingency plans in the meantime," he said. Sources of non-Eskom generation needed to be fast tracked.

"Three thousand megawatts of independent supply needs 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 EIUG 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."

- Sapa