Prepaid electricity for all

All South Africans, including businesses, should move to prepaid electricity, which would put an end to the growing debt owed by municipalities and lead to lower tariff increases, said Eskom acting chief executive Brian Molefe.

The move would also improve Eskom's cash flow constraints, he said.

Molefe made the suggestion during yesterday's joint meeting of the public enterprises and energy committees when MPs quizzed him about the growing debt of municipalities. He repeated his comments later at a media briefing.

Molefe said it would be a good time to "unplug the line" from municipalities, put it directly into houses and put in prepaid meters.

"My advice to the board, and I say this without proper consultation, but it is a view that I personally hold very strongly and that I plan to canvass with government as well as the board and the regulator, is that Eskom should bypass these municipalities and provide electricity directly to the residents on a prepaid basis.

"The municipalities are not paying Eskom. This debt is increasing. There's talk of 20 municipalities that are severe defaulters. There has been talk of shutting down or cutting off electricity to these municipalities," said Molefe.

Eskom announced recently that it was considering interrupting bulk electricity supply to the top 20 defaulting municipalities across the country, starting in June.

Eskom's acting chief financial officer, Nonkululeko Veleti, said the debt owed by municipalities totalled about R25 billion.

"Just to correct the misunderstanding on the numbers on the debt in total, we indicated that we've got overdue municipal debt of about R4.5bn. Then we have Soweto debt of about R8bn. But in actual fact, the total debt at a point in time, including those paying on time, is about R25bn. So a lot of those are current and paying on time, but if you take a snapshot at a point in time, that is the total," said Veleti.

Molefe said this would be a good time for Eskom to "unplug the line" and put in prepaid meters.

"That way we can stop the increase of debt firstly; secondly, we will get the benefit of prepaid electricity which will allow us to improve our cash flow and balance sheet. In fact in the long term I think the whole of South Africa must move to prepaid electricity."

This could start with municipalities that were in arrears, and "even corporates should go prepaid".

If the whole country moved to prepaid perhaps the utility could request lower tariff increases.

The matter still had to be discussed by the board and with the energy regulator and municipalities.

Co-operative Governance and Traditional Affairs Minister Pravin Gordhan said last year that Gauteng municipalities owed a staggering R3.4bn. KwaZulu-Natal municipalities owed R1.27bn.

The SA Local Government Association said yesterday: "The constitution (section 152) mandates municipalities as the authority responsible for electricity distribution to consumers. Any distribution by Eskom should be through service delivery agreements entered into with respective municipalities Eskom wishes to deliver to. The statement by the new CEO is therefore unconstitutional and is unlikely to happen without changing the constitution. It is important for Eskom to engage with the policy implications of the statement."

Msunduzi municipal manager Mxolisi Nkosi said yesterday that while it agreed that prepaid electricity was the way forward, the municipality was against Eskom's being the generator and retailer.

"We hope that this does not mean that Eskom will install those prepaid meters and thus become the generator and retailer as that would be opposed by municipalities licensed as distributors by Nersa. "

Msunduzi, he said, relied a lot on revenue from electricity.

"Eskom cannot take over the retail side of electricity only, they will have to take over the repairs and maintenance as well as the outlay of the new electricity infrastructure."

The eThekwini Municipality's city manager, S'bu Sithole, had not heard Molefe's remarks and was unable to comment.

The uMhlathuze (Richards Bay) Municipality's spokesman, Mdu Ncalane, said: "The move would be devastating to us as a city, and to many other cities that supply electricity. As licence holders, we make much of our revenue from selling electricity - about 60%."

He said the move needed to be "thoroughly scrutinised" if it was to be considered.

"We don't owe Eskom and we've never been in arrears - we pay up front."