BHP defends South Africa electricity fee

BHP Billiton has become embroiled in a public dispute in South Africa over the price its aluminium smelters pay for electricity, amid fears power shortages will occur this winter as demand rises.

BHP Billiton has become embroiled in a public dispute in South Africa over the price its aluminium smelters pay for electricity, amid fears power shortages will occur this winter as demand rises.

South African power utility Eskom has called on customers to cut power usage by 10 per cent.

And, amid speculation over the low price BHP pays for its electricity under long-term contracts, Eskom has called on the country's energy regulator to review the price.

"Our aluminium business has always paid more for electricity than the cost of generation and, for many years, has paid well above the market rate for power," BHP said, according to local media reports.

Business newspaper Beeld reported late last week that Eskom is selling electricity to BHP's aluminium smelters, Hillside in Richards Bay and Mozal in Mozambique, for half the 41ยข it costs to produce one kilowatt-hour.

"While the agreements will now be in the public domain, we remain firm in our belief that the negotiated pricing agreements are legally binding," BHP said.

BHP entered into its initial contract with Eskom in 1992, with the contract to run until 2028.Wires

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