Q&A’s for the Energy Sector, 2012

Questions for reply 

Question no.: 725

Date of publication: 16 March 2012

725. Mr L W Greyling (ID) to ask the Minister of Public Enterprises:
(1) Whether Eskom is buying back electricity from energy intensive companies; if not, how was this conclusion reached; if so, (a) under what regulatory authority is Eskom buying back electricity and (b) at what rate per kilowatt hour;

(2) Whether the rate was negotiated with individual companies; if not, why not; if so, what were the terms of reference during the negotiations;

(3) Whether Eskom is compensating companies for (a) the profit they have foregone or (b) total revenue lost as a result of not running operations at full capacity; if not, in each case, how was this conclusion reached; if so, in each case, what is the (i) name of the company and (ii) cost to Eskom? NW891E

Reply:

 (1) Yes. Eskom commenced with negotiating and buying back electricity from large industrial customers in December 2011.

(a) Eskom’s buying back of electricity is based on an arrangement with the relevant customers. The National Energy Regulator of South Africa (NERSA) is comfortable with the approach being used by Eskom and is kept informed of its (Eskom’s) longer term buy back plans.

(b) The rate is determined by mutual agreement with the customer taking into account the business unique operational requirements, including amongst others, operational flexibility, fixed cost and Eskom’s requirement of no job losses associated with the electricity buy-back. The agreed rate is within Eskom’s cost of generating electricity within the existing fleet of generation options. 

 (2) A response is provided in (1) (b) above.

(3) Eskom does not compensate companies for the profit they have forgone. As indicated in (1)(b), the rate is determined by mutual agreement with the customer taking into account the business unique operational requirements including amongst others, operational flexibility, fixed costs and Eskom’s requirement of no job losses associated with the electricity buy-back. Details pertaining to total revenue lost, name of the company and the cost to Eskom cannot be made public as it is a confidential agreement between Eskom and relevant customers.