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dam-l energy supply in SA/LS (fwd)
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From owner-irn-safrica@netvista.net Wed Dec 15 23:29:00 1999
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Date: Wed, 15 Dec 1999 12:31:52 -0800
To: irn-safrica@netvista.net
From: lori@irn.org (Lori Pottinger)
Subject: energy supply in SA/LS
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Business Day (Johannesburg)
December 15, 1999
By Robyn Chalmers
Johannesburg - It looks as though the long
wait is nearly over for electricity users. There is greater
consensus on the reshaping of the R25bn
power distribution sector than there has been in almost a
decade, although the path ahead is filled
with pitfalls.
This is, after all, the biggest overhaul of
an industry in local history, and a host of players are
involved. Talks have been held in many
different forums, starting with the formation of the National
Electrification Forum in 1993. Some trade
unions have fought against the restructuring and there has
been lobbying from many quarters, led by
electricity utility Eskom and the SA Local Government
Association.
This culminated in a workshop last week
between government and other interested parties aimed at
forging agreement on the way forward.
Minerals and Energy Minister Phumzile
Mlambo-Ngcuka says government's vision is to optimise the
electricity supply industry to provide
adequate, reliable and low-cost electricity.
The distribution sector today is highly
fragmented. Electricity is distributed to consumers by Eskom
and more than 400 municipalities. The
financial health of municipalities differs markedly, with some
highly profitable and others on the verge of
bankruptcy.
The energy white paper estimates that four
municipalities earn 50% of the total electricity surplus and
a further 18 earn 25%. At the other extreme,
290 local authorities bring in less than 1% of the total
surplus and the bottom 25% lose money on
their electricity sales.
There is also a wide disparity in the prices
paid by different customers. Mining companies pay
between 9c and 17c/kWh in Gauteng and up to
32c/kWh in Mpumalanga, for example.
However, while many distributors are not
financially viable, collectively the industry is able to fund
both the supply of electricity and
electrification over the long term.
Says the white paper: "If the industry is
expected to both contribute to funding other municipal
services (as it currently does) and to pay
for the electrification programme in the long term, it will go
bankrupt without alternative funding and
pricing mechanisms, a reduction in the wholesale electricity
prices or substantial tariff increases."
The way forward is premised on forming a
number of independent, financially viable, regional
distributors. An interim body, the EDI
Holdings Company, will oversee the transition and the
regional distributors will be subsidiaries
of the holding company until they are independent.
The EDI model requires Eskom's distribution
division to be separated from the utility and merged
with municipalities to form regional
distributors. This is an integral part of the recently announced
decision by the cabinet to unbundle Eskom's
regulated business.
Mlambo-Ngcuka says that the larger, more
profitable local authorities like Durban or Cape Town
could see regional distributors established
as early as next year. The final deadline for all regional
distributors to be independent is 2004.
Xolani Mkhwanazi, CEO of the National
Electricity Regulator, says the challenges facing the overall
power supply sector - which includes
distribution, transmission and generation - are formidable.
They include supporting economic transition
while electrifying communities in remote areas.
The goal, he says, "is to satisfy the
electricity needs of SA customers in a cost-effective and
sustainable way".
A key challenge is to ensure that all trade
unions are on board. The National Union of Mineworkers
(NUM) has in the past opposed Eskom's
unbundling, which it sees as a step towards privatisation.
NUM general secretary Gwede Mantashe said
recently that the energy white paper placed much
emphasis on introducing competition to the
electricity supply sector. This included setting up regional
distributors, establishing Eskom's
transmission division as an independent entity and breaking the
generation division up into individual power
stations.
"This, in our view, is preparation for the
piecemeal privatisation of Eskom. In SA, public utilities
should give government leverage to drive
transformation," he said.
The union believes that Eskom should be
restructured to focus on improving efficiency levels rather
than privatisation, which Mantashe said had
led to diminished quality of service in other countries.
Mlambo-Ngcuka says she cannot claim that all
the problems facing the restructuring of the electricity
market have been solved, but believes that
"we have sufficient consensus to go ahead".
It has been a long, tortuous process for the
state and industry to get this far. If the next phase begins
soon, consumers will ultimately have access
to more reliable, better-quality and possibly lower-cost
power.
Copyright (c) 1999 Business Day. Distributed
via Africa News Online (www.africanews.org). For information about
the content or for permission to
redistribute, publish or use for broadcast, contact the publisher.
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Lori Pottinger, Director, Southern Africa Program,
and Editor, World Rivers Review
International Rivers Network
1847 Berkeley Way, Berkeley, California 94703, USA
Tel. (510) 848 1155 Fax (510) 848 1008
http://www.irn.org
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