Aluminium Federation SA begs National Energy Regulator to review its cost recovery strategy

Power utility Eskom will know in a matter of weeks whether its attempt to recover R22.8 billion for cost recovery and revenue adjustments is successful.

The National Energy Regulator of South Africa’s (Nersa) hearings on Eskom’s regulatory clearing account (RCA) ended on Friday and the regulator will make a decision on February 25.

The RCA application is a cost recovery mechanism that seeks to reconcile the tariffs Nersa awarded Eskom on the basis of a range of forecasts and what materialized, as reflected in the utility’s financial statements.

The mining sector, which is a major consumer of power, told the hearings that the application was not affordable in the current economic climate.

Major companies and business organizations begged Nersa to reject the application, citing the negative effect a further price hike will have on jobs, labour costs, reduced capital investment and productivity.

The Aluminium Federation of SA executive director Mark Krieg said electricity tariffs had increased by 250 per cent since 2006/07. The price escalation of above inflation and load shedding has negatively affected the aluminium industry.

“This affects electricity price predictability and certainty. This is required to encourage investment in a period of low economic growth. The aluminium industry is energy intensive. It relies on a reliable affordable electricity supply,” Krieg said.