Eskom wants to take over electricity distribution in municipalities that are in arrears on their bulk supply bills, but it needs the support of the National Treasury, whose municipal debt relief programme it says does not work.
Eskom CEO Dan Marokane says the Treasury must compel municipalities in arrears to let Eskom take over their electricity services.
The distribution agency agreements Eskom wants implemented can be made mandatory if the Treasury issues a circular to that effect or amends legislation in the Electricity Regulation Amendment Act (ERAA).
Marokane has described the situation as “dire”, with municipal debt arrears to Eskom rising to almost R100bn by end-March, 33% higher than in the previous year.
Marokane repeated his warning that unless it was resolved this debt may negate the impact of the R254bn debt relief package the government granted Eskom.
Eskom head of distribution Monde Bala said few municipalities had the capacity to run their own electricity businesses. That necessitated Eskom bringing its own skills.
The municipal debt relief programme run by the Treasury was instituted in March 2023 when arrear municipal debt was R58bn.
It was an extension of the Eskom debt relief package and gave participating municipalities the opportunity to have their arrear debt to Eskom written off over three years, provided they complied with strict conditions.
These included paying current Eskom bills in full, maintaining an 85% collection rate and ring-fencing their electricity business. Once a municipality is admitted to the programme, Eskom suspends all credit control measures against it, including litigation.
The Treasury said 71 municipalities were admitted to the programme and 60 received warning letters because of noncompliance.
By the end of February, only 16 were considered compliant “or still within the curing period allowed in terms of their debt relief approval”. They were Mogale City, Nama Khoi, Beaufort West, Dawid Kruiper, Cederberg, Matzikama, Kannaland, Sol Plaatje, Raymond Mhlaba, Msunduzi, Amahlati, Makana, Bela Bela, Ubuntu, Ramotshere Moiloa and Umsobomvu.
Fourteen municipalities had their first debt write-off by that date, totalling R3.5bn, or 6% of the R55.3bn expected in the first debt relief cycle. More are being considered, said the Treasury.
Bala said most participating municipalities acted as if the programme gave them a payment holiday. Metros had begun to default. As their consumption was high any metro default had a big impact on total arrears.
Only Mangaung was now part of the programme, “although they are struggling, they comply”, he said. Eskom reached an agreement with the City of Tshwane and was busy resolving its dispute with the City of Joburg. Ekurhuleni struggled from time to time but was largely keeping up with its Eskom bills, he said.
The distribution agency agreement that Eskom is relying on to resolve its municipal debt problem follows the active partnership agreements promoted earlier by former Eskom CEO André de Ruyter.
While the partnership agreement had a short-term collaborative approach with the municipality taking the lead, the agency agreement saw Eskom taking over the service for an extended period.
If the municipality agreed, Eskom took over, ring-fenced the electricity business and did the metering, billing and revenue collection. Municipal tariffs apply. Eskom attended to electricity theft.
Eskom retained the cost of bulk supply and paid the balance to the municipality. In addition, amounts the national government paid to municipalities to provide free basic electricity to poor people was paid directly to Eskom as municipalities used it for other purposes.
Marokane said Emfuleni paid its Eskom bill last month in full for the first time since 2017 thanks to the Eskom intervention. “We actually require this to be a programme owned, supported and championed by National Treasury,” Marokane said.
“We are at a point where talking is not going to yield the results that we want. We get ourselves entangled in long programmes with municipalities, while the situation is actually becoming dire,” he said.
Eskom said its initial focus would be on the top 14 defaulting municipalities making up 58% of arrear municipal debt.
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