Powerships: Consumers will carry the risk
The government’s proposed deal with Karpowership SA to buy electricity generated on its three floating power stations over a period of 20 years will expose consumers to considerable risk.
Maduna Ngobeni, acting chief operating officer of the Department of Energy’s office for independent power producers (IPPs), recently confirmed that among other things, fluctuations in the international price of liquefied natural gas (LNG) and the dollar/rand exchange rate will be passed on to consumers.
Other pass-throughs are carbon tax and environmental levies.
Mike Schüssler of Economists.co.za warns that consumers could find themselves at the same disadvantage Eskom did with its historic price agreement to supply the Hillside aluminium smelters in Richards Bay: this was done at a tariff linked to, among others, the dollar-denominated price of aluminium set in London.
The agreement was concluded decades ago and only came to an end in July last year. Eskom ended up selling electricity at a huge loss. Independent analyst Ryk de Klerk last year estimated that since 2013 the contract had cost Eskom R15 billion.
Eskom was however bound to it and earlier efforts to renegotiate the terms were unsuccessful.
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