Western Cape Business News

Send  Share  RSS  Twitter  06 Mar 2009

POWER SUPPLY: Seeing RED In Electricity


Recent Western Cape Business News

THE Cape Town Regional Chamber of Commerce and Industries says it views with great concern government plans to change the Constitution in order to take the responsibility for electricity distribution away from municipalities and hand it to Regional Electricity Distribution organisations (REDS).

“Not only does this proposal amount to an abuse and reckless disregard for the sovereign status of the Constitution which is not to be tampered with lightly, but the imposition of REDS will add another layer of bureaucracy which South Africa can ill afford,” said Mr Jeremy Wiley, President of the Chamber.

“It would be far more productive and useful if the Minister of Mineral and Energy Affairs focused on the management of Eskom and on finalising the Feed-in Tariff Structure for other electricity suppliers to encourage investment and to augment Eskom supplies.

Independent power producers were often more environmentally responsible than Eskom which was one of the biggest polluters in the World with its coal-fired power stations.    

He said intervention may be justified in some areas where there had been under investment in infrastructure and poor maintenance, but many municipalities provided an outstanding service and it would be unwise to take responsibility for electricity away from them and hand it to a new, unproven and inexperienced body.

The sale of electricity provides municipalities with essential revenue and underpins their cash flow. In addition, the threat of cutting off the electricity supply is the most effective way for municipalities to collect billions of rands in outstanding debts.

"If major municipalities lose the electricity distribution service their finances and financial management will be undermined and their ability to deliver essential services to their residents severely eroded," said Mr Wiley.

He said the priority should be to assist municipalities that failed to provide a reliable service and not to interfere with those that were functioning well.

There would be massive problems in valuing assets built up over generations before they could be transferred to the REDS, and municipalities would justifiably require compensation. Disputes and court cases were inevitable and there would be further problems with the transferring of staff and pensions.  

"Imposing the REDS on the people and municipalities of South Africa will create an enormous amount of unnecessary work for officials and lawyers at a time when there are more important things to do. It seems that the Government has just not learned that fixing things that are not broken is a pointless and expensive exercise."

Mr Wiley said previous attempts to create a RED in Cape Town had been a disaster. Expensive offices had been leased and staff had been appointed and paid huge salaries while nothing was achieved.

"It is not difficult to predict that the new REDS will mean more bureaucracies, more fat cat jobs and the result will be more increases n the price of electricity while municipalities will have to increase rates to compensate for the loss of revenue. The people of South Africa have had to deal with one electricity monopoly called Eskom for decades and the imposition of yet another monopolistic structure will inevitably add to the cost of electricity for all consumers.

"The electricity crisis was the result of Government decisions to stop Eskom building new power stations, poor Eskom management and reduced maintenance schedules by Eskom and some distributors. It was not caused by municipalities. What is required is more technical help and support for weak municipalities and not wholesale reorganisation. The City of Cape Town has maintained its electrical reticulation network quite well over many decades and the people and businesses of Cape Town expect it to continue to do so.," Mr Wiley said.

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