Page 64 of 91 ANNEXURE D Relief on electricity costs Annexure d
One of the key challenges and impediments to growth in the steel sector is the supply of affordable and stable electricity. A number of energy-intensive industries that were established because of low electricity prices are not viable on the applicable Eskom standard tariff. There is strong evidence that, amongst other factors influencing business sustainability, the increase in real electricity prices in SA over the past decade has contributed to the deterioration in SA’s competitive position as a global supplier of value added products, particularly for those businesses for which electricity constitutes a large percentage of operating costs. The DMRE has approved the revised short term and long term framework for negotiated pricing agreements (NPAs) for energy intensive users which sets out the criteria for NERSA to evaluate, approve and monitor NPAs. The evaluation of NPAs at inception is based on the cost of supply. Direct Eskom customers can apply to Eskom and municipal customers can apply through the municipal licensee. Eligibility criteria • The applicant’s operation / sector would be unsustainable in the short or long term on the applicable standard tariff • Electricity must be a significant driver of the applicant’s operating costs (i.e. typically within the top three highest cost elements) • Alignment to SA’s priority and strategic industries will be taken into account • An applicant must consume a minimum of 80 GWh and/or have a load factor greater than 70 percent during at least two of the past three years in order to apply • A letter from the dtic supporting the applicant’s request for NPA. • Consideration of the key strategic and socio-economic impact on SA in regards to job retention, beneficiation, taxes and levies, balance of payments, etc. Short Term Framework (STF) • The STF aims to provide qualifying consumers with access to electricity prices that are lower than would otherwise be available to such consumers, for a period of up to 36 months, with an option to extend after review. The STF has two distinct incentive categories, namely • Category 1: Enabling qualifying consumers that have been forced to close or severely curtail operations or have under-utilised productive capacity to utilise some or all of this capacity; and • Category 2: Enabling qualifying consumers that are facing an imminent threat of closure or severe curtailment of operations to sustain operations. • A lower tariff can be considered for take or pay and commodity uplift arrangements.
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The South African Steel and Metal Fabrication Master Plan 1.0
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