South Africa: Five Dedicated Electricity Distribution Companies to be Established by 2025

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  • South Africa’s Department of Public Works and Infrastructure last week released its Draft National Infrastructure Plan 2050 Phase 2 Distributed Infrastructure. 
  • The plan outlines an expectation that five dedicated electricity distribution companies will be established by 2025. 
  • Municipal electricity provision will be overhauled to ensure that local authorities can be held accountable for their failure to pay bills and to secure necessary generation capacity for residents.
  • If a municipality loses its license to operate the electricity distribution network, it will then need to contract with a licensed operator.

The report states that at the end of 2021, customers owed municipalities R232 billion, representing 12 months of revenue from these services. More than three-quarters of this debt is older than 90 days, making it challenging to recover.

“The debt situation is becoming more serious each successive year. For example, municipal debt owed to Eskom increased 250% from 2017 to 2021,” it said. At the same time, customer debt has been increasing while assets and services have deteriorated due to weak governance, inadequate management and technical capabilities.

Power distribution overhaul

Going forward, the plan outlines that conditions for an electricity distributor to obtain and retain an operating licence will be clarified, with material consequences such as loss of a licence should conditions not be met. For instance if a municipality loses its licence to operate the electricity distribution network, it will then need to contract with a licenced operator.

The department said that licence conditions will include strong financial transparency and technical performance reporting requirements. This will result in a consolidation of the electricity distribution business over time through the creation of dedicated electricity distribution companies serving multiple municipalities.

Over the next three years, a dedicated professional team will be created within Nersa to drive performance improvements and reforms of the municipal electricity business through implementing an effective licencing regime.

The operating licence is expected to be implemented in the 2023/24 financial year, with the first cases of retraction and transfer of licences from municipalities to other entities in the same year.

The department expects five dedicated electricity distribution companies to be established by 2025, performing within acceptable standards of financial performance, reliability and asset management and investment.

Link to full draft plan HERE:  47343 21-10 PublicWorksInfrastructure

Author: Bryan Groenendaal


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