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Articles: State to railroad new national electricity plan

Posted by admin on Tuesday, April 25, 2006 - 08:03 AM

NEW legislation forcing municipalities to participate in the restructuring of the R30bn electricity distribution industry will be signed into law before June, sending a strong signal that government wants the long- delayed process to be finalised within the set deadlines.
Khulu Phasiwe

The Electricity Restructuring Bill, which awaits the signature of President Thabo Mbeki to become law, will also set the much-awaited guidelines on how power utility Eskom and the 187 licensed municipal distributors will be compensated for merging their assets to form six regional electricity distributors. The proposed new legislation is expected to address concerns raised by both Eskom and municipalities about how they should be compensated for their assets. Some municipalities feared they would lose revenue by surrendering their electricity distribution assets to the new regional power distributors. Historically, municipalities have made big surpluses on electricity sales and have used these profits to subsidise other services. Addressing delegates at the Gauteng electricity summit yesterday, Deputy Minister of Minerals and Energy, Lulu Xingwana, said the absence of enabling legislation had resulted in the stalling of the restructuring process. SA presently has one regional distributor, led by the Cape Town municipality. Xingwana said a lack of compensation guidelines had also resulted in Eskom and Cape Town municipality operating through a “whole number of agreements” in a bid to deliver services to the customers in that area’s regional distribution business. The participation of municipalities in the restructuring process of the electricity industry has to date been voluntary, a loophole that some local authorities had exploited to stall the process. Government said the restructuring was aimed at integrating the electricity distribution industry and to eliminate the existing 2000 sets of tariff that Eskom and municipalities charge customers. The plan is to establish six regional distributors by June next year, and a national distributor is also in the pipeline. Although Eskom has already restructured its seven distribution regions into six divisions in line with the six regional power distributors, the parastatal said yesterday that it preferred entering into a commercial agreement with the new regional distributors instead of owning a stake in them. Eskom’s MD of the distribution division, Mongezi Ntsokolo, told the summit the company preferred compensation either through interest-bearing financial instruments or asset-lease agreements. “We would like to have our compensation in one cheque, if possible. Otherwise this will give a wrong signal to financiers that we are giving our assets away,” said Ntsokolo. He said Eskom preferred to retain its key industrial customers. But Gauteng MEC for local government Qedani Mahlangu lashed out at Eskom’s suggestion. She said Eskom, as a state-owned enterprise, should partner government to achieve its socio- economic goals. Saleem Mowzer, CEO of SA’s first regional electricity distributor, agreed with Mahlangu. “Our view is that the assets belonging to Eskom have been paid for by taxpayers and they should not be expected to pay twice for them.” Mowzer said his distributor favoured the option where each participant owned shares in proportion to the value of the assets they had contributed to the entity.

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