Municipalities have sounded the alarm over provisions in a draft power bill that will dilute their role in on-selling and distribution of electricity. This would be disastrous for already cash-strapped municipalities that generate most of their revenue from electricity sales.
The majority of South Africans buy their electricity from municipalities that purchase it from Eskom and then resell it to households, businesses and other institution. Data published by Stats SA show that the surplus municipalities earn from this is usually their biggest revenue stream and can account for more than a quarter of total municipal revenue.
According to the SA Local Government Association, the organisation responsible for local government oversight, the Electricity Regulation Amendment Bill, which has been approved by parliament and sent to President Cyril Ramaphosa to be signed into law, will infringe on the powers granted to local government in the constitution as a seller and last-mile distributor of electricity.
The question of how to include municipalities as SA forges ahead with the reform and transition of its electricity sector has been raised many times, but so far no-one has made any real effort to find the answers.
At the moment municipalities seem to be losing on all fronts. They have already seen their revenue stream from electricity come under pressure as some customers switch to private renewable power and as the trading market for electricity in SA becomes more fully established, one of the key aims of the Electricity Regulation Amendment Bill, this trend will accelerate. But with the last-minute provisions introduced in the bill, the revenue that municipalities could still earn from distributing that electricity is now under threat.
The liberalisation of the power market does bring some opportunity for municipalities to be more active players in electricity generation and to buy electricity from other suppliers that may offer electricity at cheaper prices than Eskom
The liberalisation of the power market does bring some opportunity for municipalities to be more active players in electricity generation and to buy electricity from other suppliers that may offer electricity at cheaper prices than Eskom.
While some municipalities such as Cape Town, Johannesburg and Tshwane have announced plans to start generating more electricity themselves, in their current state it is unlikely that many will have the capacity to make use of these opportunities.
Not completely separate from this is the issue of municipal billing. Even if the bill was amended to provide some safeguards to municipalities for the reticulation of power, their ability to maintain the infrastructure that they need to deliver this service will still be threatened if they cannot get their customers to pay their bills.
Eskom is owed R75bn in arrear debt by municipalities, but municipalities, in turn, are owed more than R300bn by their customers.
The National Treasury has tried to find a solution to this by introducing the debt-relief programme for municipalities that owe Eskom arrear debt. However, as Eskom CFO Calib Cassim said at the Enlit Africa conference in Cape Town this week, municipalities just don’t seem to have the ability to meet the conditions that have been set for them to participate in the programme.
Finding solutions for these challenges faced by municipalities will take the same effort and level of organisation from the government and private sector that has gone into alleviating the immediate electricity crisis. Otherwise, it might be the reason all other efforts to reform the power sector will fail.
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