Makana tackles blackout
While Eskom has rejected Makana’s initial repayment plan for its remaining debt of R53 million to the power utility, acting municipal manager Riana Meiring is confident that further negotiations will stave off the threat of electricity cuts to the municipality, and that strong measures to recover and protect revenue will build a buffer against its further sinking into debt.
Residents and businesses were alarmed when on 7 December, Eskom published a notice in a regional newspaper saying that Makana Municipality was in breach of its payment obligation to it and that Eskom was contemplating a regulated interruption of electricity supply, Monday to Friday 6am to 8am and 5pm to 7.30pm; Saturday and Sunday 8.30am to 11am and 3pm to 5.30pm. This was “in order to protect the national interest in the sustainability of electricity supply”. The debt at that time was R58.05 million.
At a meeting on 21 December, Eskom rejected a proposed payment plan that would see Makana paying off the debt in tranches with the last instalment in 2020.
“Eskom wanted the Municipality to pay R23 million by the end of March 2017 along with a revised payment plan,” Meiring told Grocott’s Mail earlier this week.
“The Municipality agreed to this. The new payment plan must be submitted by 10/01/17 for consideration.”
Anticipated sources for the R23m include the R15m equitable share due to Makana in March; an anticipated electricity revenue increase from R700 000 to R1m with the new time-of-use billing system; the recovery of a wheeling charge (for using transformers in Makana as a conduit) from the Waainek windfarm; and calling in payments of more than R6m from particular bulk users.
Meiring is confident the new plan will meet with Eskom’s approval. This is because it is backed by clear measures to recover and secure the municipality’s electricity revenue.
At the core of these is new software that enables detailed analysis of data. This in turn provides tools for strategic decision-making when it comes to targeting problems.
Some of the problems being addressed, Meiring said, are:
•Corrupt data: Of the municipality’s several billing areas including rates, water, sewerage, refuse and electricity, only the last was a problem, due either to improper meter readings, or meters not being read at all. Where there were disparities in readings over 50%, the software rejects the bill and the reading first has to be physically verified and then processed manually.
•Lack of capacity: The ca- pacity of the municipality’s finance department to manually recalculate debt was limited, and it would therefore take up to six months to reprocess “wrong” accounts.
•Lack of a link between technical services and the finance department: Standard in municipalities was a revenue protection unit, which ensured information sharing between the technical department (e.g. about the location of water meters, and how to read them properly etc); and the finance division, which has the data to monitor trends and disparities. Such a unit would be established in Makana once the resources to fund it were available, Meiring said.
Asked about the high interest on the [then] R58m debt – an amount of R17m, Meiring said Makana had raised the prime plus 5% being charged as an item for negotiation.
Of the R14m adjustment added by Eskom to Makana’s bill, Meiring said they had requested details.
However, on the basis of strong measures taken to address revenue loss as well as Makana’s clear intention to repay its debt, Meiring said she believed coming negotiations with Eskom would resolve the situation and avoid power interruptions.
“I am strongly confident,” Meiring told Grocott’s Mail yesterday.
Anticipating the success of the Makana/Eskom nego- tiations, the Grahamstown Business Forum said, “The Business Forum would like to acknowledge the work of the acting Municipal Manager leading to this agreement and wishes to commit itself to supporting our Municipality in all areas aimed at improving the quality of life of all businesses and residents.”
The Grahamstown Residents Association, however, encouraged residents to use the opportunity to engage with Eskom as per their notice, on the basis that negotiations were still ongoing. “The GRA will be making a submission and people are welcome to contact us if they would like to contribute to it,” secretary Tim Bull said.
In response to questions from Grocott’s Mail about the progress of negotiations with Makana Municipality regarding its debt and the threatened power interruptions, Eskom’s media desk wrote in an email: “Eskom can confirm that the company has issued a disconnection notice for nonpayment and is currently in discussions with Makana Municipality relating to the outstanding debt owed.
“Any outcomes of these discussions will be made available in a formal publication upon the conclusion of the process as defined in the Promotion of Administrative Justice Act.” Local government and provinces are entitled to the equitable share to provide basic services and perform prescribed functions. Budgetary conditions are set as well other requirements to ensure the money is used as allocated. Section 214 requires that a Division of Revenue Act (DORA) be passed each year where national income is divided among national, provincial and local government spheres and account was taken of provincial and local government’s own income generation so that monies are equitably divided. The equitable share targets the funding of basic and free services