Bay pays Eskom more than it makes for electricity

The Nelson Mandela Bay municipality is paying Eskom more money than it makes from electricity, a situation that has prompted calls for an investigation into whether the metro is undercharging residents or overpaying the power utility.

Councillors bemoaned how the electricity department had incurred a more than R100m loss during the 2020/2021 financial year, as the municipality paid R3.64bn to Eskom while only generating R3.53bn from electricity.

The metro also incurred R574.78m in non-revenue electricity losses by June 2021.

The figures were contained in a report discussed at a budget and treasury committee meeting yesterday.

ANC councillor Rory Riordan said the metro needed a concrete plan to deal with the “crisis” in the city’s electricity and energy department.

“Our payment to Eskom is larger than our entire collection rate,” he said.

“Electricity was always a profitable department and we seem to be subsidising that department. Plainly, we have a crisis that we need to address,” he said.

From July 1, the price of electricity increased by 14.59%.

The increase was a contentious issue which further stretched consumers, who complained they were already paying too much for an inconsistent power supply.

Riordan said the municipality should get to the bottom of the electricity billing debacle.

“We need a team assembled to see if the metro is paying appropriate tariffs to Eskom and to also check if we’re overpaying Eskom.

“We also need to look if we’re undercharging our clients, to look at our losses and compare to other metros and address those.

“We can’t continue on this loss trajectory,” he said.

ANC colleague Litho Suka agreed with Riordan’s recommendations.

Budget and treasury political head Malcolm Figg asked the secretariat to note Riordan’s recommendations.

The metro’s failure to collect enough revenue has already resulted in ratings agency Moody’s Investors Service downgrading the Bay and four other municipalities, putting them deep into junk status.

The city’s revenue collection was 84.1% at the end of May, with Covid-19 also contributing to the failure to collect revenue.

The municipality now wants to offer a 90-day amnesty to residents and businesses that have tampered with their electricity meters.

The metro recently said the owners of 57,000 homes had not bought electricity in the past 12 months, contributing to its revenue collection woes.

The municipality is grappling with an illegal electricity connection crisis, while it also subsidises indigent residents through its assistance-to-the-poor programme.

In his report to the committee, Bay chief financial officer Selwyn Thys said indications were that electricity bulk purchases could be overspent by at least R57m once all year-end accruals had been processed.

“The extent of actual electricity losses played an important role as to final cost of bulk electricity purchases.”

Businesses and residents have been frustrated by regular breakdowns of substations, which have resulted in large parts of the Bay being left in the dark. This is over and above Eskom’s load-shedding.

To prevent further vandalism at substations, the mayoral committee also passed an item to enlist the help of businesses to protect the facilities.

Thys also revealed yesterday that the metro’s capital expenditure stood at only 68.65% at the end of June.

“One other important point that led to poor spending is the Covid-19 lockdown period as it has also impacted on the spending against capital projects.”

He said the delayed transfer of conditional grants by the National Treasury also led to a low level of capital spending.

By June 30, the Treasury had not paid R255.41m of the equitable share and R10m for the neighbourhood development partnership grant.

The figures on expenditure would change once the books had been finalised, Thys said.

“Revenue, water and electricity will also change.”