- Regulator approves a 35.6 percent electricity tariff reduction for two major ferrochrome producers.
- Relief aims to prevent further job losses and plant closures in a struggling smelting sector.
- Industry warns that broader intervention is still needed to address uncompetitive power costs.
South Africa’s energy regulator Nersa has approved a temporary electricity tariff reduction of 35.6 percent for Samancor Chrome and the Glencore Merafe Chrome Venture, providing short term relief to two distressed ferrochrome smelters facing severe cost pressures.
The approved tariff lowers electricity rates to 87 cents per kilowatt hour for a period of 12 months. The decision is intended to stabilise operations at the two facilities and avert further retrenchments and potential plant closures in an industry that has been badly impacted by rising power costs.
Nersa noted that electricity tariffs for energy intensive users have increased by more than 300 percent between 2008 and 2023, undermining the economic viability of local ferrochrome production. High energy prices have already contributed to multiple shutdowns across the sector, placing thousands of direct and indirect jobs at risk.
While welcoming the relief, the affected smelters indicated that the approved tariff remains above sustainable levels. According to submissions made to the regulator, the companies believe a tariff closer to 62 cents per kilowatt hour is required to support long term, competitive operations. By comparison, Eskom’s average standard electricity tariff as of 1 April 2025 is approximately 220.92 cents per kilowatt hour.
The tariff reduction forms part of a broader government and industry intervention aimed at stabilising South Africa’s smelting industry while a more sustainable and competitive pricing framework is developed. Authorities expect this longer-term solution to be finalised within the next three months.
Eskom submitted its waiver extension application after the main tariff application but requested that Nersa consider both simultaneously, citing the interconnected nature of the relief measures. The utility also reiterated that the discounted tariffs would not be subsidised by other electricity users, including residential customers.
In a statement, Nersa explained that the adjusted tariff covers the marginal cost of electricity, along with necessary subsidies and legacy charges. “This will ensure that Eskom does not incur direct operational losses while providing temporary relief to the industry. Costs related to the National Transmission Company South Africa’s (NTCSA’s) network, Distribution operating expenditure (Dx Opex), Distribution depreciation and Distribution finance costs will be recovered through the Government support funding mechanism. This mechanism will ensure that the revenue shortfall between the approved NPA tariff and the temporary reduced tariff is not recovered through the Regulatory Clearing Account (RCA) and does not impact Standard Tariff Customers (STCs). The proposed ring-fenced Government support mechanism ensures that standard retail customers, including residential and commercial customers, are not burdened with additional cross-subsidies arising from the relief measures,” said Nersa.
Nersa further approved that Eskom must submit progress reports on the relief’s implementation three months after it takes effect and every three months thereafter until the relief period concludes. This reporting will enable Nersa to monitor both the execution and effectiveness of the measure.
The approval is seen as a critical short-term intervention to ease immediate financial strain on the ferrochrome industry while longer term structural solutions to South Africa’s energy pricing challenges are pursued.
Author: Bryan Groenendaal
