Council debt may take more strain

Johannesburg - Eskom's proposed tariff hike will lead to more bad debts for municipalities, the SA Local Government Association (Salga) said on Friday.

"A 35% tariff hike will be a shock to the system and it will cause bad debts to rise, putting even more strain on municipal finances," Salga chairman and Johannesburg mayor Amos Masondo told hearings in Midrand into the proposed hikes.

He said electricity distribution was a business activity for municipalities. He was speaking on the final day of hearings held by the National Energy Regulator of SA (Nersa) on Eskom's application for a 35% increase every year for the next three years.

Salga spokesperson and executive director of municipalities Mthobeli Kholisa told the hearing any solution to Eskom's problems did not start or end with the parastatal.

"Others must play a role and Salga is committed to playing its role."

Kholisa however criticised the government's latest integrated resource plan (IRP) as required by the Electricity Regulation Act.

"There was no public consultation and we don't know if the IRP is a legitimate document."

Kholisa questioned whether or not Eskom's latest tariff application complied with existing government policy.

Turning to Eskom's application to Nersa, he said it did not consider what implications would arise if electricity demand fell.

"This would mean that revenue would be lower and then Eskom may not be able to fund its capital programme. Eskom must look at alternatives."

He recommended Eskom raise equity by selling assets. It should also reduce its revenue requirements by deferring some capital expenditure.

Finally, Kholisa recommended the parastatal accelerate the progress of involving independent power producers.

"If Eskom adopted these recommendations it would be able to lower its request to below 30% for three years," he said.

- Sapa