Ministers gridlocked about what municipalities should charge consumers
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.