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Municipal debt could escalate beyond R9bn – Singh

Jun 14 2017 13:28
Liesl Peyper

Cape Town – Municipal debt to Eskom currently stands between R9bn and R10bn, according to Eskom CFO Anoj Singh.

The power utility briefed Parliament’s select committee on public enterprises on Wednesday on its tariff increase for the 2017/18 financial year and the amended pricing structure at municipal level that will come into effect on 1 July 2017.

During question time, Eskom was asked to elaborate on the outstanding amount municipalities owe Eskom and if the power utility has been able to recover some of the debt.

In the beginning of the year, Eskom threatened to cut electricity supply to eight municipalities.

At the time, Eskom said municipal debt increased from R6bn in March 2016 to R10.2bn in an eight-month period.

Singh told MPs on Wednesday that Eskom has made payment arrangements with altogether 62 indebted municipalities. The electricity of four municipalities have been turned off.

However, only 31 of the municipalities with payment arrangements are currently servicing their debt and 31 are therefore “delinquent”, Singh said. “Also, the 31 that are paying are not up to date with their payments, but at least they are paying.”

He therefore believes the R9bn current debt will escalate in all likelihood. “That means we’ll have to go through another cycle to try and mitigate the debt situation,” Singh said.

Tariff increases

During the briefing, Deon Conradie, senior manager of electricity pricing at Eskom, pointed out that Eskom consumers actually experienced a decrease in the real cost of energy for the 2017/18 financial year, as the inflation rate is currently between 5% and 6%.

On February 23, the National Energy Regulator of SA (Nersa) allowed Eskom’s standard tariffs to rise by 2.2% which came into effect on 1 April. Municipal tariff increases of 0.3% will come into effect on 1 July 2017.

Eskom also confirmed it is in the process of submitting an approval for a 19.9% tariff increase from 1 April 2018 which will be for the 2018/19 financial year.

The current multi-year price determination which lasts for a five-year period comes to an end on 31 March 2018 and the power utility needs to submit its application for the next period. 

Nersa has approved a revenue application for a single financial year.

In addition, Eskom wants municipalities to pay 27.3% more for bulk electricity purchases from July 1 2018.

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eskom  |  debt  |  electricity  |  municipalities
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