Min­is­ters grid­locked about what mu­nic­i­pal­i­ties should charge con­sumers

Sparks fly

Finweek English Edition - - Insight - TROYE LUND

A STAND­OFF IN­VOLV­ING mu­nic­i­pal elec­tric­ity tar­iffs is gath­er­ing mo­men­tum in Pres­i­dent Ja­cob Zuma’s Cabi­net as En­ergy Min­is­ter Dipuo Peters and Min­is­ter in charge of Lo­cal Govern­ment Sicelo Shiceka fail to agree on an is­sue cen­tral to the kind of suc­cess both make of their re­spec­tive port­fo­lios. The nub of the spat is the fact mu­nic­i­pal­i­ties are re­fus­ing to heed a rec­om­men­da­tion by the Na­tional En­ergy Reg­u­la­tor (Nersa) to cap their elec­tric­ity in­creases. While mu­nic­i­pal­i­ties ar­gue they alone have the right to de­ter­mine the sur­charges they bill con­sumers for dis­tribut­ing the bulk elec­tric­ity they buy from Eskom, when Nersa ap­proved in­creases of 24,8%, 25,8% and 25,9% for the State’s power sup­plier ear­lier this year it rec­om­mended a much lower cap on the in­creases mu­nic­i­pal­i­ties charge con­sumers (15% this year, then 16,03% and 16,16% over the fol­low­ing two years).

Peters is un­der pres­sure to save en­ergy and make sure it re­mains af­ford­able for the poor. But she says the way mu­nic­i­pal­i­ties gen­er­ate rev­enue through elec­tric­ity tar­iffs coun­ter­acts her ef­forts on both scores. But Shiceka is also un­der pres­sure to get the be­lea­guered tier of lo­cal govern­ment – which has been the cause of in­creas­ingly reg­u­lar and vi­o­lent protests – func­tion­ing prop­erly. Next year’s mu­nic­i­pal elec­tions are around the corner and Shiceka’s al­ready called on ANC-led mu­nic­i­pal­i­ties not to al­low the poor state they’re in to give op­po­si­tion par­ties a big­ger chunk of the vote. He’s warned he’ll fight any ef­fort to cap sur­charges mu­nic­i­pal­i­ties ask for dis­tribut­ing the bulk elec­tric­ity they buy from Eskom.

While the min­is­ters have dif­fer­ing opin­ions on which body should have the fi­nal say on mu­nic­i­pal elec­tric­ity tar­iffs, and while the South African Lo­cal Govern­ment As­so­ci­a­tion (Salga) is go­ing to ask the courts to rule on the mat­ter, Shiceka told Fin­week: “We aren’t go­ing to take this ly­ing down. Mu­nic­i­pal­i­ties can’t be sud­denly told they no longer have the in­come they had. Nersa has no lo­cus standi on this mat­ter.”

The re­al­ity is that mu­nic­i­pal­i­ties have be­come in­creas­ingly de­pen­dent on the prof­its they re­ceive from sell­ing wa­ter and elec­tric­ity. While most mu­nic­i­pal­i­ties in­creased their elec­tric­ity tar­iffs by 34% last year (above the 31% in­crease Nersa granted Eskom), in some cases wa­ter and elec­tric­ity sur­charges pro­vide mu­nic­i­pal­i­ties with 45% of their to­tal rev­enue.

Salga ex­ec­u­tive di­rec­tor of in­fra­struc­ture ser­vices Mtho­beli Kolisa re­it­er­ates Shiceka’s warn­ing and says any plan to dic­tate to mu­nic­i­pal­i­ties as to what they can sell power to con­sumers for will put the fi­nan­cially em­bat­tled mu­nic­i­pal tier of govern­ment un­der “con­sid­er­ably more pres­sure”. Fact is, most mu­nic­i­pal­i­ties rely on the sur­pluses from elec­tric­ity sales to fi­nance ev­ery­thing ex­cept what it’s sup­posed to be for: rein­vest­ment into SA’s elec­tric­ity grid in­fra­struc­ture. For ex­am­ple, the to­tal cost of the mu­nic­i­pal elec­tric­ity dis­tri­bu­tion in­fra­struc­ture back­log is al­ready R27bn.

Peters says she un­der­stands the fi­nan­cial predica­ment mu­nic­i­pal­i­ties find them­selves in. For that rea­son she says she and Shiceka are “en­gag­ing” Na­tional Trea­sury to de­ter­mine ways to over­haul the way lo­cal govern­ment is funded. While that kind of re­view would be a mam­moth task, and while the op­tions are limited with­out ex­ten­sive con­sti­tu­tional changes, most of SA’s mu­nic­i­pal­i­ties are fi­nal­is­ing their bud­gets and poised to in­crease elec­tric­ity tar­iffs in July, in ac­cor­dance with what they need to de­liver the ser­vices ex­pected of them.

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