The Minerals Council South Africa has confirmed that it has applied to be joined as a third respondent in a court bid to halt a controversial settlement agreement between power utility Eskom and the National Energy Regulator of South Africa (Nersa).

Under the terms of the proposed settlement agreement, about R54-billion would have been added to Eskom’s allowable tariffs over a three-year period.

Nongovernmental organisation AfriForum had previously succeeded in securing a temporary halt in the implementation of the settlement agreement.

“The Minerals Council’s intention is to ensure just, fair, and sustainable electricity tariffs,” it said, highlighting that it had brought its own application in the matter independently of that launched by AfriForum.

The council explained that it only learned about the judicial review and the impending settlement on August 27, when Nersa released a media statement to this effect.

“It would not be appropriate for the court to sanction the settlement agreement as an order of court, which effectively results in the court substituting its decision for that of Nersa. 

“In the interest of ensuring just, fair and sustainable electricity tariffs, the only appropriate constitutional remedy would be for the court to remit the decision back to Nersa so that the tariff is redetermined taking into account the interests of all affected parties,” it argued.

The Minerals Council added that the above-inflation tariff increases were eroding the global competitiveness of energy-intensive industries, including the mining sector, which was a significant power consumer.

It said this was an important consideration, owing to the mining sector relying fundamentally on electricity for its day-to-day operational functions.

The Minerals Council explained that electricity price increases for large users such as the mining industry had increased by more than 930% since 2008, noting that the consequences of this rapid increase in tariffs had been seen in the ferroalloy industry, particularly in ferrochrome, where smelters had been closed or mothballed and jobs cut.

For the chrome and ferrochrome industries, it described the cost of electricity as a major factor in rendering South African ferrochrome production globally uncompetitive and not the supply or price of chrome feedstock.

Further, the Minerals Council argued that above-inflation electricity tariff increases would not only make the value addition to South Africa’s minerals more uncompetitive, it would erode profits for marginal operations, curtail job creation in the industry and might expedite the premature closure of older, marginal mines.

“A sustainable Eskom is critical to the success of the mining industry and the South African economy.

“To this end, it is in the interest of everyone to ensure affordable and reliable electricity hence a redetermination taking account of the interests of all the affected parties is the competent and proper way to solve this dispute,” it said.