Nersa says special power deal for Silicon Smelters must start on July 1 or earlier

6th December 2017 By: Terence Creamer - Creamer Media Editor

Nersa says special power deal for Silicon Smelters must start on July 1 or earlier

Photo by: Duane Daws

The National Energy Regulator of South Africa (Nersa) has confirmed that a special pricing agreement (SPA) between Eskom and Silicon Smelters, which was approved in August, should commence no later than July 1, 2018, and continue for a maximum of two years.

Silicon Smelters, a subsidiary of British metals and materials producer Ferroglobe, suspended ferrosilicon production at its Polokwane and eMalahleni smelters in 2016, largely as a result of the increase in Eskom’s tariff. In a joint submission to Nersa, Eskom and Silicon Smelters indicated that an SPA would enable the resumption of production.

In its record of decision, in which the exact pricing terms have been redacted, Nersa said the effective date of the SPA would be determined by the commencement date of each plant.

Eskom would charge a tariff calculated using its 2017 base price, which has not been disclosed. This tariff would be adjusted yearly, on January 1, by producer price inflation.

The tariff would also be sensitive to changes in the ferrosilicon price, but would be capped at Eskom’s MegaFlex tariff rate should the price of the commodity rise considerably over the period.

Silicon Smelters would be required to pay for a minimum consumption of 85% or its normal quarterly power consumption and would also make 80% of its applicable load available for interruption by the system operator.

The approval comes amid a call from various energy-intensive companies for Eskom to make available its current power surplus at discounted prices so as to shore up demand and support manufacturing and mining activity in the country.

Several presenters at hearings into Eskom application for a 19.9% tariff increase from April 1, argued that a framework should be put in place to extend SPAs to other energy intensive businesses in distress, particularly those that could be forced to shut production or cut jobs as a result of higher power costs.

Nersa will make its determination on Eskom's application on December 13.