The City of Johannesburg has two multibillion-rand hurdles to jump if it is to take over the electricity distribution network from Eskom: it will have to pay the power utility R7.5bn to cover outstanding consumer debt and R4bn to take ownership of distribution infrastructure.
Newly installed executive mayor Mpho Moerane said in his inaugural remarks that the city planned to take over distribution from Eskom, which has run into deep conflict with township communities due to unpaid bills and illegal connections.
But Eskom has responded by saying there is yet a long road to travel and talks are at initial stages. However, both the city and City Power say an in-principle agreement was reached in July 2020 at a meeting attended by Eskom and public enterprises minister Pravin Gordhan.
The supply of electricity is turning into an important election issue, particularly in Gauteng, where communities have borne the brunt of “load reduction” by Eskom. Load reduction, unlike load-shedding, targets areas where payment levels are low and illegal connections, which overload the system, are rife.
In an interview on Sunday, Moerane said that a memorandum of understanding would be signed on Friday with Eskom to outline the areas of work that need to be processed. This would mark the start of the process, which “would take some time”. He said talks with Eskom began as far back as 2016 but stalled after the ANC lost control of the city. With the ANC back in power, the talks had resumed, Moerane said.
“Eskom has indicated to us that the city would have to take over the debt and pay around R4bn for the infrastructure. When it comes to the debt, we need the National Treasury and the department of co-operative governance & traditional affairs to assist us. The city does not have R7.5bn. On the value of the infrastructure, we will undertake due diligence to determine the true value before we proceed,” he said.
Moerane said at least 42 substations in Soweto were not working and the true value of the infrastructure would need to be assessed.
City Power’s own infrastructure backlog is considerable, with the total sitting at R26bn, comprising new electrification projects, bulk infrastructure projects, public lighting and refurbishment projects, said spokesperson Isaac Mangena.
“The infrastructure is very old and we are exploring raising money through partnerships with the private sector, to install infrastructure on a build, operate, transfer model and we pay them over time,” Moerane said.
Eskom has struggled for decades to collect consumer debt from Johannesburg’s townships. It directly supplies Soweto, Orange Farm, Finetown, Diepsloot, Ivory Park and all of Sandton. Soweto’s debt alone stands at R17.5bn after a recent R5.3bn debt write-off.
City Power has had its own difficulties collecting revenue from customers, with arrear debt of R7.5bn at the end of September: R4.2bn pertaining to large customers and R3.3bn to residential customers.
City Power has had severe governance problems in the past, with allegations of corruption and conflict between the CEO and city. Newly appointed CEO Mongezi Ntsokolo, who had been in the job for just five months, is on special leave as allegations against him, arising from his previous employment, are investigated.
Mangena said the governance and management issues were resolved, with an acting CEO in place, all executive committee positions but one filled and a fully capacitated board.
Moerane said that given the difficulties with revenue collection, especially in the densely populated suburbs, the city would not want to find itself in the same situation as Eskom in several years’ time. It therefore wanted to introduce a “mixed energy policy”, reduce the amount of electricity used by residents and move away from dependence on Eskom to its own cheaper sources of energy.
This includes encouraging the use of gas for cooking and heating, energy from waste at its landfill sites, recommissioning three gas turbines that were built during the 2010 World Cup and commissioning independent power producers to produce directly for the city.
Two requests for information are shortly to be issued to the market, one for advice on energy mix planning and a second for the recommissioning of the gas turbines.
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