Regulator approves Eskom tariff discounts for ferrochrome groups

The Energy Regulator has approved six-year negotiated pricing agreements (NPAs) for ferrochrome smelters operated in South Africa by both Glencore-Merafe Chrome Venture and Samancor Chrome.

The National Energy Regulator of South Africa (Nersa) issued a statement on November 6 confirming NPAs had been approved for four of Glencore-Merafe Chrome Venture’s ferrochrome operations in Mpumalanga, Limpopo and North West, as well as for six of Samancor Chrome’s smelter operations in Mpumalanga, Limpopo and North West.

Eskom submitted the applications to the regulator on May 9 in line with the interim long-term NPA framework approved by Mineral Resources and Energy Minister Gwede Mantashe in August 2020.

The framework targets large power users with minimum consumption thresholds of 80 GWh and/or load factors greater than 70% and where electricity is a large cost component.

The interim long-term NPA framework aims to incentivise, through discounted tariffs, the retention of operations in strategic sectors that would otherwise be severely curtailed or shut down without discounted rates.

In the past, tariffs have been indexed to the price of the commodity being produced, but it was not immediately clear whether that was the case for the Glencore-Merafe and Samancor Chrome NPAs.

Nersa reported that Eskom will implement separate six-year NPAs for Glencore-Merafe Chrome Venture’s Boshoek (130 MVA), Wonderkop (310 MVA), Lion (275 MVA) and Lydenburg (165 MVA) operations.

The Samancor Chrome operations, meanwhile, collectively amount to 1 363 MVA, or projected baseload sales of about 7.6 TWh yearly, and include: Ferrometals (270 MVA), Middelburg Ferrochrome (286 MVA), Tubatse Ferrochrome (245 MVA), Tubatse Alloy (220 MVA), TC Smelters (140 MVA) and Dikwena Chrome (202 MVA).

The NPAs could be implemented one full calendar month after Nersa’s approval and terminate 72 calendar months thereafter.

Nersa did not provide tariff details but indicated that the NPAs were set at a level to ensure the sustainability of the operations, while covering Eskom’s cost of supply.

It also did not confirm whether the agreement included a clause for Eskom to interrupt supply, which is the case with other NPAs.

The State-owned utility, whose tariffs have been rising steeply for several years, has indicated previously that to qualify for an NPA larger consumers need to show that they would not be sustainable on the applicable standard tariff.