You pay for municipal electricity losses

On average 18% of the electricity that South African municipalities bought from Eskom in FY2013 was lost and never reached paying customers. The situation is continuing.

That amounts to R15.4 billion in payments to Eskom that has to be recovered from tariffs without any value exchange. Paying consumers have to fork out for the electricity they buy as well as the electricity lost.

A staggering 22 million MWh was lost due to technical issues and theft, representing half of the 2511MW of generation capacity, and more than half that of Eskom’s new Kusile power station.

This information was extracted from the applications municipalities submitted to the National Energy Regulator (Nersa) for tariff increases that kick in on July 1.

Nersa couldn’t distinguish between technical losses and theft. It sets a benchmark of 12% for electricity losses and has disclosed that losses at six municipalities amount to 40% or more of what they purchase. Eighteen municipalities have losses between 30% and 40%. The worst performer is Nquthu municipality in the Umzinyathi District of KwaZulu-Natal, with 63% electricity losses.

Among the metros, Johannesburg’s City Power is the only one to exceed the benchmark with 22% electricity losses while eThekwini boasts the lowest at 6%.

This news comes as Eskom is battling to supply enough electricity to keep the lights on, industrial customers are regularly asked to reduce their demand and load shedding has already occurred (on March and a few times since during the evening peak). The electricity supply deficit has been acknowledged by President Jacob Zuma in his State of the Nation address as one of the factors constraining South Africa’s economic growth.

All municipalities exceeding the 12% benchmark have had to explain the reasons for their high electricity losses to Nersa, which the regulator then evalutes. “In cases where our view is that these losses can be better managed, we either do not allow for tariff increases or such increases are limited,” says Charles Hlebela, Nersa spokesperson.

From Nersa meetings attended by Moneyweb it is clear that low spending on repairs and maintenance – often the root cause behind technical losses – is consistently being questioned by Nersa.

Economist Mike Schüssler says if one adds the R1 billion bad debt for electricity sales that municipalities write off every quarter and the outstanding debt older than 90 days that will most probably be written off in future to the electricity losses, more than a fifth (22.7%) of the electricity municipalities pay for, fail to generate money for them.

That electricity still has to be paid for and the municipalities tend to increase the tariffs to their paying customers who end up subsidising inefficiency to an increasing extent.

Electricity losses: metros:

Electricity losses: ten worst performers:

Source: Moneyweb

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