The Department of Works and Infrastructure says the city’s electricity supply needs to be reviewed to ensure local governments can be held accountable. about their failure to pay the bills and guarantee the necessary production capacity for the people.

The ministry last week released the document for Phase 2 of the National Infrastructure Plan 2050, detailing the path the government will take in implementing the country’s major infrastructure projects. himself in the next 30 years.

One of the biggest problems the country’s development faces is the difficulty for cities in collecting money owed to them by customers, the department said.

This prevents municipalities from paying their creditors, which affects their ability to provide electricity and water to households and residents, resulting in service failure , he declared.

At the end of 2021, customers owe the cities Rs 232 billion, equivalent to 12 months of revenue from these services. The Department said that more than three-quarters of the debt is over 90 days old, so it is difficult to collect.

Meanwhile, municipalities owe their creditors Rs 76 billion over the same period, or Rs 30 billion more than customers (counting customer debt less than 90 days only).

“The debt situation is getting worse every year. For example, the city’s debt to Eskom increased by 250% from 2017 to 2021,” he said. At the same time, customer indebtedness increased while assets and services deteriorated.

The ministry attributed most of the decline to poor governance and inadequate technical and managerial capacity. This especially affects the supply of electricity and water – something that has been highlighted in the current electricity and water crisis facing many centrally-run cities.

Electricity is changing

In particular, electricity has had a heavy impact on residents. In addition to the load reductions set up by Eskom, which left millions of South Africans in the dark for hours, residents also suffered from higher electricity prices than inflation. Eskom has asked for a sharp increase in 2023 – to 32% – which will always be reduced to the city tax rate.

Cities won a Supreme Court victory this past week when the courts overturned energy regulator Nersa’s method of calculating increases, but DPWI believes more needs to be done.

The Phase 2 plan includes a major overhaul of how cities self-govern the business of electricity, calling for a new licensing regime.

The department said a city’s ability to operate as a distributor is conditional, and the city must obtain a license to operate with serious consequences attached. “The conditions for the distribution unit to obtain and maintain a license to operate will be clarified, with important consequences such as loss of the license if the conditions are not met,” he said.

“If a city loses the right to operate the electricity distribution network, it must contract with an approved operator.”

The department said licensing conditions will include strong financial transparency and technical performance reporting requirements.

This will lead to consolidation of the electricity distribution business over time through the establishment of dedicated power distribution companies serving multiple centrally-run cities.

“The process will be accelerated through the use of financial incentives that link access to financing for infrastructure upgrades with performance,” the ministry said.

He said that over the next three years, a dedicated professional group will be established in Nersa to drive improvements and efficiency reforms in the city’s electricity sector through the implementation of a trusteeship regime. effective rights.

Business licenses are expected to be implemented in fiscal year 2023/24, with the first cases of revocation and transfer of licenses from centrally-run cities to other entities in the same area. a year.

In the meantime, the Department expects five dedicated power distribution companies to be established by 2025, meeting acceptable standards for financial performance, reliability, financial management. property and investment.