(Photo: Paul Botes/AFP)
AfriForum sent a reminder letter to Eskom to ask that the power giant not continue with the intention to stop power supply to towns due to overdue municipal debts.
The organization argues that Eskom’s latest notices have legal shortcomings and their enforcement will be unlawful.
Earlier this week, Eskom issued notices to 14 municipalities in which strict conditions were set. Pursuant to these notices, municipalities must settle their outstanding debts or accept one of three options:
- A council decision to enter into an agency agreement with Eskom, in terms of which Eskom takes over the responsibility for the distribution of electricity.
- The conversion of the municipality’s system to a prepaid model, according to which the municipality will only receive electricity that has been paid for in advance.
- An agreement in terms of which municipal residents pay their power bills directly to Eskom and are charged Eskom’s rates.
However, AfriForum warns that the implementation of a pre-paid system can have serious consequences.
“If municipalities are switched to a pre-paid system, it is highly likely that they will not be able to purchase enough electricity to power a town for a full month. The most vulnerable members of communities, including the elderly and patients in hospitals, will be hit the hardest. Water and sewage infrastructure could grind to a halt, causing a humanitarian and infrastructural disaster.”
“In addition, residents who pay their bills faithfully are unfairly disadvantaged,” says Deidré Steffens, adviser for local government affairs at AfriForum.
According to AfriForum, it is also not financially feasible for municipalities to fully transfer electricity bills to Eskom.
“The sale of power forms a core component of many municipalities’ income. If this income falls away, municipalities’ financial structures can collapse within a short period of time,” warns Steffens.
Eskom is aware that in practice municipalities only have one remaining option, namely concluding an agency agreement, says AfriForum. Although such agreements may offer a workable solution, they must be strictly in accordance with legislation. In the current circumstances, however, municipalities are under pressure to conclude such agreements without proper compliance with legal requirements.
In terms of the Municipal Systems Act, a municipality that wants to hire an external service provider must first conduct a feasibility study and follow a proper public participation process.
AfriForum argues that Eskom’s notices do not offer municipalities sufficient opportunity to comply with these legal requirements.
“By confronting municipalities with unrealistic options without leaving room for legal processes, Eskom places them under unfair pressure and excludes communities from participating in decisions that affect them. The end of this could be that Eskom, which itself has already been exposed to financial management challenges, acquires an even greater monopoly in South Africa and excludes other role players in the market,” says Morné Mostert, head of local government affairs at AfriForum.
The organization says legislation stipulates that any change in a licensee’s distribution responsibilities must be approved by the national energy regulator (Nersa). AfriForum therefore also sent a letter to Nersa in which the following is requested:
- Confirmation of whether Nersa has granted written approval to any municipality to cede, transfer and/or assign its electricity reticulation services to Eskom in terms of a distribution agency agreement.
- An undertaking that Nersa will exercise its powers in terms of the Electricity Regulation Act by preventing Eskom and any municipality from concluding a distribution agency agreement without complying with the legal requirements that apply to the appointment of an external service provider.
“Nersa is supposed to play a central role in this scenario, but once again shines in their absence. One of Nersa’s main focus points must be what license holders do with their responsibility, including the distribution of power,” says Mostert.
AfriForum says several other competent companies can successfully implement distribution agency agreements. However, Eskom’s current approach hinders fair competition and puts municipalities and communities in a difficult position.