Economic growth in South Africa could lead to more load-shedding, with beleaguered power utility Eskom unable to meet higher demand, Matleng Energy Solutions chairperson and Eskom board member Nelisiwe Magubane warned at Afriforesight’s recent Future of Coal and Bulk Commodities Conference, in Johannesburg.

The warning was underlined by energy specialist Mike Rossouw, who noted that demand had decreased in recent months, enabling Eskom to avoid load-shedding.

Rossouw said that the problems at Eskom were the result of “a completely incorrect” pricing policy.

He indicated that its current policy was suitable in the past, when the utility was of a smaller scale and not investing as much on new power generation plants.

However, he said, Eskom did not presently have the required revenue to pay for its scale of operations – which was 500% bigger, compared with its scale in 2001 – nor did it generate enough revenue to support the new plants it was building.

Therefore, Eskom could not just raise electricity tariffs, as demand would still be insufficient to raise the required revenue to cover its costs.

Rossouw stressed that pricing and demand were connected. He noted that industry and mining houses were responsible for the bulk of Eskom’s revenue; however, they were being overcharged.

For example, smelters had about 60% of their costs set for electricity, and therefore, even a small price increase in electricity had a considerably negative effect on their operations and business.

This, he noted, resulted in their having to shut down their operations or move their operations to other countries where they received better prices.

He said Eskom could not present itself as being cost competitive, compared with other countries, by merely looking at its average price of electricity.

Rather, for an accurate comparison, it should consider the energy price being paid by its densest users, and compare that with others countries’ prices for the same, Rossouw suggested.

He lamented that the focus on fixing Eskom was on addressing the symptoms, rather than the root cause of pricing policy.

However, he noted that, should this problem be addressed, the utility’s challenges could be resolved without the need for long-drawn-out Parliamentary processes.