Private power’s big threat to South African towns and cities

Poor service delivery could see South African municipalities lose revenue from electricity tariffs as more private power producers are expected to come online in the coming years.

That is according to economist Dawie Roodt, who recently spoke to the Sunday newspaper Rapport about a letter from the Nelson Mandela Bay Business Chamber to the National Energy Regulator of South Africa (Nersa).

The chamber — which includes over 700 businesses in the Nelson Mandela Bay metro — has asked Nersa to revoke the municipality’s electricity distribution licence because it was not abiding by its licencing conditions.

It stated that the municipality loses over 20% of the power it buys to electricity theft through meter tampering, resulting in law-abiding consumers paying more.

According to the chamber, the municipality has been uncooperative when it offers to help with the situation.

The chamber has also asked that Eskom be allowed to supply electricity directly to the metro’s customers.

Roodt said municipalities would face mounting pressure to be more efficient in electricity provision or risk losing customers to private power in the coming years.

Sakeliga’s Piet le Roux told Rapport that it was common for municipalities not to meet their licencing conditions.

The conditions for distributing electricity include that the provider can keep outages outside of load-shedding to a minimum or attend to most of them within a reasonable time.

Should more customers move away from municipal power, local governments could lose a substantial portion of their revenue to fund various other functions.

Many businesses have also accused municipalities of charging exorbitant rates compared to Eskom.

Municipalities fighting back

Municipalities are not making it easy for customers to acquire private power or get direct supply from Eskom.

Some have proudly proclaimed big plans to buy private power and resell it to customers, but present a different face when residents want to provide their own power or choose their own suppliers.

The South African Local Government Association (Salga) has launched a legal bid for municipalities to get a monopoly over distributing power within their jurisdictions.

That would mean customers couldn’t buy power from private producers or directly from Eskom, as some areas currently do.

Another area where municipalities could get in the way is Nersa regulation.

Although private individuals and businesses can now build power projects with a capacity of up to 100MW, they must still get a registration certificate from Nersa.

Nersa requires that a private project first get permission from its power distributor.

These distributors could be municipalities, Eskom, or a combination of the two, depending on where the electricity must be transported.

However, most municipalities do not yet have separate tariffs for distribution and would have to conduct a thorough cost analysis to determine these.

Nersa recently announced it had approved the registration of 216 private power projects since the threshold for licencing was lifted.

Most recently, it approved 16 private power projects which will provide electricity for personal or commercial use.

The projects will boast a combined maximum capacity of 211MW and consist of solar and wind power generation.

The regulator also said it approved over 50 projects with a combined capacity of more than 29MW in the first quarter of 2022.

Now read: Goodbye load-shedding — generator vs battery backup price comparison

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Private power’s big threat to South African towns and cities