Many of the decisions expressed in SA’s policies and legislation in the electricity sector have made it extremely difficult for municipalities to fulfil their mandate, SA Local Government Association (Salga) president Bheki Stofile says.
Speaking at the Municipal Just Energy Transition Conference in Johannesburg on Monday, Stofile said the municipal fiscal framework was designed with the expectation that municipalities would fund 90% of their mandate through locally raised revenues, of which electricity distribution revenue would constitute more than a third.
“However, due to national government intervention, about 60% of electricity distribution is performed by Eskom, leading to significant revenue losses for municipalities,” he said.
The two-day conference aims to find a way forward for the effective implementation of the Just Energy Transition Investment Plan (JET IP) at the municipal level.
Much of the burden of the just energy transition will fall to municipalities, which have been given wide-ranging responsibilities for climate change mitigation and adaptation under the Climate Change Act. Municipalities will, for example, have to develop their own climate change response strategies.
In addition, municipalities have a critical role to play in a successful energy transition, but many lack the finances and capacity to respond to these responsibilities.
Municipalities also fear the Electricity Regulation Amendment Act, recently signed into law by President Cyril Ramaphosa, will limit their role in providing electricity to households, businesses and government in their service areas. This, municipalities have argued, would infringe on the powers granted to local government in the constitution.
Salga deputy president Xola Pakati told the conference the Electricity Regulation Amendment Act posed an “existential threat” to municipalities as long as a clause that introduced a definition for the reticulation of electricity which would limit the future scope of municipalities to provide electricity remained unchanged.
“Salga has repeatedly implored both parliament and the president to reconsider this clause. We hope the effective date of the bill will exclude this clause, as failure to do so may undermine the very purpose of our discussions today on the municipal energy transition,” Stofile said.
Ramaphosa, who delivered the keynote address at the conference, said he understood Salga wanted “some exemptions to be inserted, and further talking to happen when implementation of the Electricity Regulation Amendment Act begins”.
But, said Ramaphosa, the act paved the way for a competitive electricity market and for reforms that would help speed up decarbonisation in the energy sector.
“Municipalities are central to our efforts to decarbonise the energy sector. [They] own and operate approximately half of SA’s electricity distribution grid and facilitate universal access to electricity. Through the integrated national electrification programme grant, municipalities are responsible for addressing the electrification backlog. Municipalities therefore need to be in the driving seat when it comes to providing clean, affordable energy to communities, businesses and industry,” he said.
Other challenges at local government levels highlighted by Ramaphosa that had to be addressed as part of the just energy transition included expanding support to indigent households through the free basic electricity programme, finding solutions to municipal debt, and extending, modernising and upgrading the municipal grid system.
According to the Just Energy Transition Investment Plan, about R320bn was needed to upgrade municipal distribution infrastructure, address the infrastructure backlog, and to plan and develop capacity within municipalities for the transition.
Another area of focus, said Ramaphosa, was to strengthen the capacity of municipalities to manage the transition which will require “extensive training and upskilling”.
Municipalities are owed about R350bn by customers for services such as electricity, and municipalities, in turn, collectively owe Eskom R78bn.
Stofile said municipalities’ attempts to engage Eskom in credit control measures had been refused, contributing to ballooning municipal debt.
“This creates a vicious cycle where municipalities struggle to collect revenue, yet Eskom demands payments without supporting municipalities in debt recovery,” he said.
As a starting point to address the municipal debt crisis, government departments and institutions that are in arrears with their municipal bills should be compelled to pay what they owe. This was according to minister of electricity & energy Kgosientsho Ramokgopa, and minister of co-operative governance & traditional affairs Velenkosini Hlabisa.
“If you start there a large chunk of what is owed to municipalities will be paid. We want to take this proposal to cabinet,” Ramokgopa said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.