As the country experiences crippling power cuts, the City of Cape Town is in talks with Eskom about an ambitious plan to take over supplying power to more residences in the metro.
The City is engaging with the power utility on how Eskom customers can be transferred to the City’s grid. This involves plans to purchase some of the utility’s infrastructure to enable such a move.
The City is using its ability to mitigate load shedding for its customers by cutting the time the power is out as a selling point.
A source with inside knowledge of the talks told Weekend Argus: “The City is considering taking over some of Eskom’s residential customers to bring the service standard in line with the City’s and offer a similar level of protection against load shedding as offered to City customers.”
The Western Cape’s outgoing MEC for Finance and Economic Opportunities, David Maynier, previously did the math and estimated that load shedding cost the province R75 million per stage, a day.
Stage 2 load shedding costs the provincial economy R150m a day and stage 4, R300m.
This is a huge financial blow, considering Eskom has warned of 101 days of load shedding during winter.
Eskom spokesperson Sikonathi Mantshantsha told Weekend Argus that it was in exploratory talks with the City about the purchase of infrastructure.
Eskom said the country required further and urgent investments in generation infrastructure to ease the capacity constraints and to fully cater for a growing economy.
“Eskom welcomes any active role that municipalities can play in bringing about new capacity, such as the City has been implementing,” said Mantshantsha.
Mayor of Cape Town Geordin Hill-Lewis stressed that talks were at “a very early stage”.
“Much detail needs to be resolved,” Hill-Lewis said.
The transaction needs to follow a regulatory process that involves the acquiescence of the National Energy Regulator of South Africa (Nersa) to transfer the distribution licence from Eskom to the City.
The parties would first have to satisfy the regulator that affected stakeholders including customers were being consulted and agreed to the changes.
This condition can only be met through a public participation process handled by the regulator.
The City also requires additional maintenance staff and financial planning to ensure the upgrade and maintenance of the network.
The City will then require council approval.
“Eskom will need to consult Nersa as part of their licence conditions,” the source said.
“We would need to amend ours as well since we are amending our area of service covered by the licence.
“All residential customers should be handed over to the municipality so that customers can contribute to street lighting costs and related services,” the source said.
At the moment Eskom customers don’t pay for maintenance of street lights whereas the City’s customers do.
The source said, “We (the City) also have to cover the costs of providing a public lighting service to the entire city. For example, an Eskom customer does not pay a contribution to rates.
“We are currently evaluating which customers should be prioritised and then will engage Eskom to push for those customers to be handed over to the City.”
The source said the City was of the view that Eskom would probably want to hand over customers or areas where it was struggling with revenue collection.
The City’s tender for IPPs has been advertised till May 25. The City will then conduct a technical evaluation of all bids and then obtain pricing bids from suitable bidders.
A total of 200MW will then be awarded after an evaluation of those bids had taken place.
A second tender is contemplated to get to at least 300MW in total.
Hill-Lewis said the process would take 18 months.
“I’m pushing hard for the dispatch and storage bids to go out earlier than September,” Hill-Lewis said.
The GOOD party supported the City’s plans.
“I think it is a good idea that there is one provider. It makes it much easier for the customer to know who to deal with if there's a problem,” said Brett Herron, GOOD secretary-general.
“The question is whether the customers are paying the same tariffs because the City has a mark-up on Eskom’s tariffs, so if (Eskom's) customers aren’t affected by the increase in tariffs then I think that it is a good idea to have one service provider.”
Energy analyst Ted Blom agrees. “I’m very happy with Cape Town taking over Eskom customers. They’re legally entitled to do it.”
Blom, however, criticised the procurement of power from IPPs as “foolish”.
“It’s not gonna happen in my lifetime or your lifetime or anybody’s lifetime. Renewables certainly are cheap when they’re available. But they’re not available all the time. Add batteries for back-up, you’re talking about a cost that is 20 to 30 times more expensive than Eskom.
“He (Hill-Lewis) is living in a fool’s paradise to think that going the renewable and IPP route is going to have adequate power and that it is cheaper.”
The lobby group Stop CoCT said it was perturbed by the proposal.
“It’s a one-sided, not transparent proposal,” said Stop CoCT founder Sandra Dickson. “Eskom’s tariffs are much lower than the City’s, there’s not a proper framework for this. We’re probably left in the dark and more confused than ever before. There’s no substantiate evidence that this plan is the best one.
“They need to go back to the table and deliberate some more.”
The move from Eskom to the City of Cape Town will lead to additional electricity price increases for residents in areas like Delft, Khayelitsha and Belhar who are currently supplied by Eskom at much lower tariffs.
Susan Hartzenberg, a machinist from Belhar, told Weekend Argus that she was not happy with the City’s plans. “It’s ludicrous, why should we pay more?” She gets 50 electricity units for R100. “We cannot afford to pay a cent more.”
Local housewife Iris Schmidt echoed her sentiments.
“Electricity is already so expensive, we do not want to pay more.”
Ahead of the local government elections last year, the City of Johannesburg wanted to implement the same type of deal.
Load shedding was suspended on Friday evening as Eskom continues relying on emergency reserves to meet demand.
Eskom CEO André de Ruyter said during April the power utility burned through R626m diesel.
This is around 48.5 million litres. That’s more than 11 Olympic-sized swimming pools.