Push for electricity supply change in South Africa

 ·6 Jan 2022

The South African Local Government Association (Salga) has submitted an application to the North Gauteng High Court for a declaratory order that would give municipalities exclusive rights to administer, distribute and sell electricity.

Speaking to eNCA, Salga chief operating officer Lance Joel said that the order would require Eskom to obtain permission from and to enter into service delivery agreements with individual municipalities in which the national electricity utility currently owns and operates its electricity transmission and distribution networks.

Joel said that electricity is a revenue generator for local municipalities and in order for them to perform their Constitutionally mandated service delivery, it is important to clarify whether electricity provision should fall under the ambit of municipalities or distributors such as Eskom.

“We are not fighting, we are really seeking clarity on a very important matter. Our interpretation is that the electricity distribution function is a function that the Constitution specifically allocates to local government. However, in practice, both municipalities and other distributors offer these services.”

Joel said that while municipalities are expected to provide service delivery using their own revenue streams,  they miss out on revenue generated through electricity to distributors such as Eskom.

“This conversation is more about the financial sustainability of municipalities more than anything else,” he said.

Salga argues that Eskom does not pay for the municipal infrastructure it uses for the distribution of electricity.

In an analysis of the court action, energy expert Chris Yelland noted that many municipalities are in a state of dire financial distress, with associated failures in municipal administration, billing, revenue collection and asset protection.

“At grass-roots level, there is deep dissatisfaction by residents with service levels and quality of supply in these municipal areas, as evidenced by widespread and ongoing protests and civil unrest.”

Yelland noted that currently, municipal arrear debt to Eskom by municipalities exceeds R40 billion, and this is rising unabated, at a rate of about R8 billion a year.

Domestic and business customers receiving power from municipal electricity distributors complain of exorbitant mark-ups on electricity procured from Eskom, and extensive and ongoing power supply outages as a result of old and poorly maintained municipal electricity distribution infrastructure.

“It appears quite clear that Salga’s application is motivated primarily by the ambitions of local government structures to raise the price of electricity across South Africa to the levels charged in municipal electricity tariffs.

“Furthermore, municipalities want to be able to apply levies and surcharges on the sale of electricity across South Africa, including on direct electricity sales by Eskom, said Yelland.

Eskom has said it will vigorously defend its rights in terms of the Electricity Regulation Act (ERA).

Read: Eskom adding 800MW to the national grid as Kusile Unit 4 gets connected

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