The City of Cape Town is digging in its heels over the government’s plans to set up the proposed regional electricity distributors (REDs) as public entities.
Mayoral committee member for finance Ian Neilson confirmed on Wednesday that the city was considering whether to scrap RED1, which was established as a pilot project under Cape Town’s control.
”Quite simply and unambiguously, we say we are not interested in transferring our staff and assets into a public entity, and we will have nothing further to do with that process,” he said.
”I suspect we will not be the only city that will not participate. Possibly because we are not African National Congress-controlled, we are fairly open about it. Other cities are more likely to just drag their heels.”
The city’s stance follows last month’s Cabinet approval for the creation of six wall-to-wall REDs as public entities regulated by the National Energy Regulator.
The REDs will be formed by combining Eskom’s distribution arm and municipal electricity departments or utilities, a move that the government hopes will help put an end to power cuts, regional tariff discrepancies and poor service.
According to Minerals and Energy Minister Buyelwa Sonjica, fragmentation caused by both Eskom (the current main electricity distributor) and the country’s 187 municipalities serving the same customers has resulted in about 2 000 tariff regimes across the country.
Neilson said RED1 was essentially a shell, with only three staff under the supervision of a board. The city’s electricity distribution staff and assets had not yet been transferred to it.
He said the Constitution laid down that electricity distribution was the responsibility of local government.
In addition, electricity was a ”quite significant” generator of income for the city, through a 10% levy on top of the actual price, which brought in about R300-million a year.
This cash was used to subsidise other services.
”It’s the most secure income stream we have,” he said. The collection of electricity charges ran at 98% to 99%, compared with below 80% for water and 95% for rates which, unlike electricity, one had to ”chase” for payment.
Electricity use also to a large extent reflects the city’s economic growth, which means more revenue.
Neilson said the city, looking at the way public enterprises are run in South Africa, did not believe they would necessarily do a better job on electricity distribution than municipalities.
He said the city now had to decide whether it should close down RED1 and retain its own staff and assets, or keep RED1 and corporatise it, like Johannesburg’s City Power.
He said the city had not had any approaches from central government on it stance.
”This is possibly going to be the first they’re hearing about it,” he said.
Comment was not immediately available from the Department of Minerals and Energy. — Sapa