Eskom to Ask More Clients to Cut Power Use on Tight Supply

South Africa’s state-owned power utility said it will ask more industrial customers to cut use to prevent managed blackouts during peak-demand times.

“We are currently in negotiations with some of our existing customers to see if we can increase beyond the contracted capacity, but we are also looking at new customers we can bring into interruptible space to ensure we can grow the reserve,” Eskom Holdings SOC Ltd. Acting Chief Executive Officer Collin Matjila said in a presentation today.

The Johannesburg-based utility has struggled to satisfy demand for power in Africa’s second-biggest economy in the last decade, with a lack of working generating capacity forcing Eskom to schedule rolling blackouts for the first time in six years in March to prevent the total collapse of the grid.

Eskom targets savings of as many as 1,000 megawatts through reduced use by both large and residential customers during peak demand times, said Steve Lennon, Eskom’s group executive for sustainability. It can also interrupt supply to BHP Billiton Ltd.’s Hillside and Mozal aluminum smelters, saving 2,000 megawatts. Customers who are members of the Energy Intensive Users group, which includes the local units of companies including ArcelorMittal and Glencore Plc, will be targeted, he said.

“We’ve already signed up 190 megawatts and we’ve got about another 200 megawatts that’s in the pipeline,” he said.

Threat Remains

Eskom is spending some $50 billion in the five years through 2017 revamping old plants and building new ones to improve reliability of power supply.

“Until new significant generation capacity is online and plant reliability improves, the threat of Eskom not being able to meet demand remains,” Public Enterprises Minister Lynne Brown said.

The first of six units of the coal-fired Medupi plant, a 4,764-megawatt facility that will be the world’s largest dry-cooled facility, will be synchronized by the end of the year, with commercial operation expected in the first quarter of 2015, Matjila said.

Medupi has been beset by delays for more than two years, and costs have increased as much as 15 percent to 105 billion rand ($9.8 billion) because of contractors’ underperformance and labor disruptions.

Kusile Plant

Synchronization of the first unit of the 4,800-megawatt Kusile plant is scheduled for the year through March 2016, with progress at the facility “not where Eskom would like it to be,” the utility said in a presentation.

The company wants talks with Anglo American Plc about supply of coal from the New Largo pit for Kusile to be concluded by the end of the year, Matjila said.

Eskom is going to the market to seek about 500 megawatts of capacity from independent power producers by the end of the year, Lennon said. “We believe there’s quite a lot of co-generation capacity that could be made available immediately from the industrial sector and there are also opportunities for entrepreneurs if they want to have a look at aggregation of standby generators,” he said.

The utility, whose prices are regulated, would recover the costs through “regulatory mechanisms” because it views these expenses as “prudently incurred,” Lennon said.

The Department of Public Enterprises and National Treasury are looking at ways to plug Eskom’s funding gap, Brown said. The shortfall, which has been reduced to 191 billion rand from 225 billion rand through cost-cutting measures, resulted after the regulator rejected the company’s plans to raise electricity prices 16 percent annually in the five years to 2018, instead allowing only an 8 percent increase.

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