The South African government has announced its first concrete plans for restructuring of the country’s electricity distribution industry. The Minerals and Energy Minister, Phumzile Mlambo-Ngcuka, revealed that the plan will involve the creation of six regional electricity distribution companies to take over the distribution of power from Eskom, the national utility, and from more than 400 municipalities.
The new distribution companies will be jointly owned by national and provincial government, with stakes determined by the proportion of assets held by Eskom and by the local government in the electricity distribution industry. The government will hold a golden share giving it the deciding vote in any disputes. Local government will get a share of revenues.
The six proposed regions are centred on anchor cities. The six are:
Western and Northern Cape, centred on Cape Town
Eastern Cape and part of KwaZulu-Natal, with Durban and Port Elizabeth as anchor cities
Greater Johannesburg City and North West
Pretoria and Northern Province
The East Rand and Free State
Mpumalanga and northern KwaZulu-Natal, with Maritzburg and Witbank as anchor cities.
The government has proposed that in the lead up to restructuring there will be a transitional structure under a company owned by the government. This company will set up the six distribution companies and ensure their long-term financial viability.
The distributors will be responsible for the electrification programme in poor, under-serviced areas, a programme currently managed by Eskom. It is not year clear how this programme will be financed in the future. There has been speculation that a levy could be charged on all generators and users. In the meantime, the cost will be born by the government.
The minister believes that restructuring will halve the anticipated electricity price rise over the next ten years. A recent restructuring exercise suggested that rises would be between 20 per cent and 40 per cent. However the aim it to achieve tariffs that reflect cost of production.
Under the new scheme large electricity users, around 180 mainly corporate clients, would have the option of buying their power directly from Eskom during the transition period. This arrangement might persist after the regional companies had been established, the minister suggested.