The Reds are coming
THE THEATRICAL POLITICKING between the ANC and DA around plans to restructure the country’s electricity redistribution network is about to step up a notch – national Government is hatching a plan to force municipalities such as the DA-led Cape Town to play ball.
Cape Town City Council (CTCC) is crying foul about Cabinet’s latest change of heart over the number of regional electricity distributors (Reds), which are supposed to consolidate electricity supply and standardise tariffs. There’ll now be six Reds and they’ll be public rather than municipal entities into which municipalities and Eskom will have to transfer their lucrative electricity distribution business and staff.
At the moment, municipalities don’t have to go along with the Reds system. They can opt to keep on distributing their own electricity. But, a new spanner will soon be thrown into the works when the Department of Minerals and Energy (DME) introduces legislation that’s expected to try and force municipalities to hand over their lucrative electricity distribution networks to the Reds. If this doesn’t work, the other option is amending the Constitution.
Objections to this aside, what this issue has underscored is how much of a lifeline electricity has become for municipalities – because of their limited ability to raise taxes.
To counter what’s seen as a threat to this lifeline and a threat to municipal independence, the CTCC now wants to kill the Red1 pilot project. This decision was made after Cabinet’s recent about-turn on who will control the Reds – as public entities they’ll now answer to Parliament not municipalities.
ANC-led municipalities such as the Nelson Mandela Metro (Port Elizabeth) are less vociferous about this but are seeking legal advice and have cautioned Parliament on the implications of this shift.
CTCC’s legal opinion is that municipalities have a right to distribute electricity and asking them to hand over this function is unconstitutional.
While the ANC is threatening to change the Constitution if all other attempts fail to get the Red system up and running, the question is how municipalities are going to be compensated and whether the plan will really strip them of key powers.
After buying the electricity from Eskom, municipalities add on their reticulation costs as well as a surcharge that subsidises other council services. CTCC, for example, has a 10% surcharge, which adds R400m to its pot each year. Some municipalities, especially the smaller and poorer ones, slap on surcharges of up to 40%, which is why there are hundreds of different electricity tariffs and why electricity in the poorest areas can be the most expensive. Added to this problem is that municipalities have not been using any of the extra cash to maintain and upgrade their electricity distribution systems.
CTCC’s Ian Neilson (DA) says: “ Electricity has been and remains the only source of income (for local g ov e r n m e n t ) that’s strongly linked to economic growth. Electricity is the key means by which local government derives returns on other investments (money that must be ploughed into infrastructure and into adhering to standards for services like water supply and solid waste management). Taking it (electricity supply) away will have a significant effect.”
The CEO of Electricity Distribution Industry Holdings, Phindile Nzimande, dismisses this argument. She says municipalities will be compensated for lost income until they are able to make it up elsewhere.
While Neilson says there’s no clarity or certainty on how this is going to happen or where this compensation is going to come from, opposition party MPs on Parliament’s minerals and energy portfolio committee agree it’s understandable that Cape Town is refusing to hand over anything until there’s clarity in what’s been a “woolly” process.
While Minister of Minerals and Energy Buyelwa Sonjica wasn’t in the country to comment, officials in her department conceded that the process hadn’t been as clear or as fast as they’d hoped, but said national Government was not about to throw local government into more disarray.
For Neilson, however, it’s about more than just money. He says that taking away control of the Reds from municipalities strips them of their right to be in charge of where and how the city grows and develops (electrification being inextricably linked to this).
“What happens if this public utility (Red) won’t give the city finance to develop and expand in the areas the city government wants?” asks Nielson, who stresses that municipalities must have full control over Reds and who heads them.
Neilson’s comments are made more pointed by the fact that the man in charge of the Cape’s Red1 is Saleem Mowzer, an ardent DA critic, who was a senior member of the city’s ANC government before the DA took control last year.
Sarah Hetherington, editor of local government specialist publication Delivery, says Neilson’s development concerns reflect too narrow a view.
Critic of the DA. Saleem Mowzer