Eskom turns to Billiton to meet demand

Jun 14 2013 08:53

Electricity pylons in Beaufort West. Nersa is holding public hearings on Eskom's proposed revenue price determination. (Picture: Chris Kirchhoff/MCSA)

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Johannesburg - Two BHP Billiton [JSE:BIL] energy-gobbling aluminium smelters were temporarily turned off by Eskom on Thursday night because demand for electricity exceeded availability, Beeld reported on Friday.

Eskom spokesperson Hilary Joffe said on Thursday night, after the peak consumer usage period, that the demand for electricity had been more than 35 000 megawatts (MW) between 17:00 and 21:00, and that Eskom could only supply 34 970MW.

Eskom had an agreement with BHP Billiton and other companies to temporarily cut power during peak consumer usage times.

Prevailing cold weather conditions and the coming long weekend had resulted in Eskom's availability being exceeded, Joffe said.

However, Thursday night's surge in demand had proceeded uneventfully without power cuts to general consumers because some of Eskom's other large clients had agreed to lower their consumption.

Thursday night was, according to Joffe, a good example of an earlier warning that South Africans would have to be frugal with their power consumption during the winter months.

Business Day reported on Friday that Eskom has invoked its right to disrupt the power supply to BHP Billiton's aluminium smelters in the case of an emergency.

The demand forecast for the remainder of this week showed South Africa was on the brink of being plunged into blackouts similar to those experienced in 2008.

In the event of an emergency, Eskom intends to exercise its option to redirect over 2 000MW of power from the Hozatel smelter in KwaZulu-Natal and the Mozal smelter in Mozambique to the grid, according to the report.

The Eskom / BHP Billiton power deal came into the spotlight after Fin24’s sister publication Sake24 won a lengthy legal battle in March this year that compelled the global mining giant to make public the prices it pays Eskom for electricity.

It emerged that Eskom sells 9% of its electricity to BHP Billiton’s two aluminium smelters at less than one-fifth of the tariff paid by other consumers.

The preferential tariffs for the two smelters, Hillside in Richards Bay and Mozal in Maputo, enable the two loss-making smelters to be sustained while the rest of the country’s consumers, both household and industrial, pay much higher electricity prices.

At Hillside, Billiton pays for two-thirds of the 1200MW the smelter uses in accordance with a secret formula agreed upon as far back as 1992 and which applies until 2028.

Hillside is paying 22.65 cents per kilowatt hour (kWh) to Eskom, compared with an average R1.40 per kWh that households fork out.

It costs Eskom 41c per kWh to generate electricity, Beeld reported shortly after the court victory.

Eskom said on Thursday that it expected demand to peak at 35 364MW against the available capacity of 34 9740MW to meet that demand, resulting in a power deficit of 394MW.

In the last few weeks the power utility continuosly warned of demand pressures and urged the public to save 10% of their usual electricity usage, especially during peak times between 17:00 and 21:00.

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eskom  |  bhp billiton  |  electricity



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