CoJ’s plans to take over more electricity distribution from Eskom would hit business hard

Tariff comparison shows a factory that paid R46m to Eskom in 2020 would have paid R71m if situated in a City Power distribution area.
Small residential users may however benefit slightly from a move away from Eskom. Image: Nadine Hutton, Bloomberg

The City of Joburg (CoJ) plans to take over electricity distribution in part of the city from Eskom, a move that will be very costly for business, the Association of South African Chambers (Asac) has warned.

Eskom currently handles distribution for 38% of the CoJ’s area of jurisdiction, including Sandton, Bryanston, Waterfall, Fourways, Sunninghill, Diepsloot, Cosmo City, Ivory Park, Orange Farm and parts of Soweto.

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A tariff comparison by Asac shows that a factory running 24 hours a day, seven days a week and supplied directly by Eskom was paying R46 million in 2020. If the same factory was situated in a City Power distribution area, its cost would have amounted R71 million for the same period. City Power is the City of Joburg’s power utility.

According to Ayal Rosenberg, managing director of WeBill, small residential users may benefit slightly from a move away from Eskom.

While there is a large number of such users in Soweto, residents in the area are also notorious for failing to pay their Eskom bills. Soweto’s arrear debt to Eskom was R13.2 billion by December last year.

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According to City of Joburg spokesperson Nthatisi Modingoane, the city “has started a process of negotiations with the view of taking over electricity supply service to the areas in the City of Johannesburg currently supplied by Eskom”.

Negotiations

The negotiations started in July last year and included representatives of Eskom, Minister of Public Enterprises Pravin Gordhan, the department of mineral resources and energy, the department of cooperative governance and traditional affairs, the Gauteng provincial government, and the city’s executive mayor Geoff Makhubo and councillors, Modingoane said.

Several working committees have been established to look at aspects such as the social, financial, human resources and statutory implications, as well as the process to be followed.

Read:
Joburg is broken (Nov 2020)

Modingoane said the city already provides other services – including water, refuse removal, road maintenance and healthcare – in these areas.

“So we came from the premise that as the city we are better positioned to manage service delivery in totality which include electricity in those areas.”

He added: “The other reason is that when people in those area do not receive adequate services including electricity, they complain and march to the City of Johannesburg not Eskom, and our councillors were attacked in the past and had their homes petrol-bombed by residents protesting against Eskom’s problems with electricity supply.

“So the reasons include that there will be reduction in number of protests, and risks faced by councillors who can now address electricity challenges with authority and not always refer customers to Eskom.

“There will be improved credit management and collections rate through the CoJ by-laws,” said Modingoane.

Matters like the Soweto debt, profits to be made in Sandton, assets, employees and systems are being addressed in the ongoing negotiations, he said.

Good idea, but …

Asac’s David Mertens says in principle it would be a good thing if all end-users in the City of Joburg were supplied by the same distributor, but City Power is hugely inefficient.

The city should improve its operations before expanding its area of distribution, said Mertens.

In a recent presentation to energy regulator Nersa, Asac showed that City Power’s energy losses increased from 19% in 2017 to 27% in 2019.

Mertens says the way municipal electricity tariffs are currently being determined is irrational. If that is rectified, the City Power and Eskom end-user tariffs won’t differ as much, he says.

Asac is engaging Nersa on the matter.

Complaints against City Power

City Power’s expansion plans come as it is engaged in a mediation process at Nersa after Trusted Utilities lodged a wide-ranging 28-page complaint against it.

Trusted Utilities consultant Rene Kilner lists among others the following complaints:

  • City Power fails to apply the correct tariffs and only corrects [them] from the date of application for a different tariff by the end-user, and upon payment of an application fee;
  • It fails to properly maintain infrastructure according to basic regulations and safety standards, which results in damages to consumer equipment and loss of production and revenue, which the consumer is not compensated for;
  • City Power retrospectively and fraudulently adjusting job cards to correspond with incorrect billing data;
  • City Power’s infrastructure database is only about 65% correct, but even the 65% does not contain data to show it is correctly programmed and that the correct tariffs are being applied.

Johan Hopley, chair of the Electricity Resellers’ Association (Erasa), says its members battle with the City Of Joburg’s incorrect billing daily.

One member, who administers 30 complexes in the city, estimates that the billing is incorrect for all but one of the complexes.

In one case a reseller has been battling since 2014 to fix a meter that was incorrectly programmed. The council by now owes the reseller R7 million – but instead of rectifying the situation, it cuts supply every now and then.

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Perhaps these businesses should pack up and move the Western Cape?

And then get the Western Cape ceded from the rest of the ANC wasteland

If you check City of Cape Town utility price increases for the preceding years are more that all other provinces.

There is room for a comparison of the overall administrated costs for all of the big cities in SA; rates and services combined.

A statement as vague as it is sweeping. Please quote your source.

True, but the lights work, as does everything else, so happy to pay slightly higher rates, CID costs and administrative charges re electricity. Its like living in Europe. I called the traffic department the other day to report and incident. Answered on 2nd ring. 2 vehicles (new and clean) were there within minutes. Staff trained and top-class

Right at this moment as I am writing we are on load shedding stage 2 but Western Cape is on Stage 1. I would have if I lived in Joburg would have been without power between 18:00 – 20:30 while here in the good old Cape because of stage 1 my power will remain on. I gladly pay that extra cost for that convenience.

Well no : my DA council costs my factory just shy R3/kWh. I am two increases away from running off grid solar diesel batteries.

A potential tenant looked at setting up new factory in my town. Despite an almost 30% rental discount here it was worth his while opening guess where : An Eskom Distribution site between me and Cape Town.

People have no idea what is coming! Councils mostly mark up their Eskom generation and transmission cost by 60% and that all goes into paying for other stuff that is not priced or free. It has nothing to do with free basic electricity, there is a central allocation for that.

Most of the businesses that COJ will target have large fixed plants that operate 24 hours per day so cannot move.

Surely for a single administration to have two pricing regimes is against the constition and fairness.

Maybe Eskom needs to take over all things electricity production and distribution from City Power.

At the moment those procuring electrity from City Power are being unfairly overcharged and are cross-subsidizing for those that steal electricity, don’t pay or procure via Eskom.

Those procuring from City Power are being hit hard. Residents and businesses.

It won’t happen for exactly the cross subsidization reason and because even with the cross subsidization COJ makes an extraordinary amount of money from the sale of electricity.

anc logic!!!

You would have thought the money could be better spent in the real economy creating jobs instead of being added to the trough where stinking pigs are let loose.

Easy to see the agenda here: Jo’burg businesses will pay for the electricity used but not paid for by Soweto residents.

Soweto and Alex residents will be rewarded for their votes by being allowed to ignore their bills. There will be write offs now and then fir their debts as long as they vote ANC. Randburg, Sandton, Joburg South bills will be inflated to cater for their voters and their own feeding frenzy.
Its time OUTA and Ratepayers organise the paying residents and business for this onslaught by Makhubo and his ANC.

Just another grand theft taking place.

These guys are now in your face, not even subtle about it.

Next water….

does not matter how one looks at the cost of electricity – for economical production, manufacturing and cost of life electricity should be sold at the lowest price possible, but still viable for the distributer (running and capital cost expense covered) of it. but not for the distributer to aim for highest profit possible to make out of this core product – to date eskom did not understand this concept – just pushed up the electricity rate and thereby made sa product’s cost unfavorable for any foreign investor and / or sa products to be sold overseas

Sadly, it’s viewed as a cash cow only. Sustainability is not in the cadre dictionary.

The problem is that the distributor (Eskom) has been looted and the costs are inflated through channeling tenders through other parties at a markup. As I understand it, diesel was not bought directly but by this method. Coal contracts have been inflated as well from what I have read. In short, Eskom is not making a profit because its costs have been inflated and it has borrowed to pay for inflated tenders on the new power stations. A monopoly like Eskom which is run by corrupt cadres cannot produce electricity at a reasonable price because the more they steal the more representations are made to NERSA to increase the tariff to cover the increased costs and to reinforce the point, rolling blackouts ensue while deliberations are taking place just in case NERSA starts wanting to reject the demands.

No I think that Eskom does understand this. They have to keep pushing the price up to compensate for their poor management, incompetent employees and corrupt practices

A townhouse complex I have an interest in receives electricity from City Power. There Are around 120 units affected, and I believe a number of other complexes in close proximity have the same issue I outline.

Around 4 years ago COJ decided they had been incorrectly billing the complex for the previous 5 years. They summarily raised around R4.5 million in revised charges.

We of course contested this in court and won the case, with costs and interest. Nonetheless COJ continues to contest and periodically tries to cut off our power. We then serve them with a court order and keep our mains power switch up.

We have a law firm on retainer at R30k per month to do all this paper moving from one side of the desk to the other and back again.

Ridiculous considering this is all distraction from any efficient purpose to ourselves or the environment. Our complex is 2 blocks away from the Africa Mall and the Century/ Mia developments.

We have over over 20 000 m2 of prime, East facing roof space for a solar installation.

Next we need to put a water catchment, storage and treatment plant in place capturing water.

COJ and City Power are a contingent liability and Joburg Water is not far behind. Time to turn problems into solutions, liabilities into assets and leave politicians and maladministrators wallowing in their own self-serving muck/ mucous.

Significant room has opened for arbitrage by green energy initiatives who can supply capital to build infrastructure that will secure additional income for titleholders. This suggestion from COJ is wishful thinking for them, their actions speak louder than words as represented by their outrageous inefficiency and severe prejudice against their own customers! Viva the #greeneconomy and #VoetsekCOJ !

the haves r paying for havenots and it gonna get worse cause authorities poep scared to cut the power and deal with violent neanderthals

In an environment of an oversupply of resources, the communalist mindset develops as a natural, innocent, fair, and benevolent mechanism to distribute this abundance of resources. In such an environment of abundance, there is no need for property rights or price signals to regulate the distribution and availability of products.

It is only the environment of scarcity that necessitates property rights and price signals to allocate resources. We experience a shortage of electricity, and the cost of electricity confirms this shortage, but the communalist mindset fails to distribute scarce resources effectively. The communalist mindset is one of consumption, and not productive, innovative, frugal, or progressive.

Our electricity disasters, along with the SOE disasters and the Debt/GDP ratio, and the unemployment disasters are merely the manifestation of the communalist mindset at the heart of our economic system. Luthuli House acts as if the national resources are abundant, while in fact, they have been depleted by ignorance, incompetence, negligence, and criminality, the well-known forces of communalism.

Why must Sandton residents pay less for electricity than the rest of Joburg?

Time for a class action law suit.

Anyone in the ‘supply of power’ value chain that does not understand their key objective HAS TO BE the provision of value to consumers (i.e. there is an actual economic imperative for all) needs to get their ar*es shifted.

BUT, sadly we still await the water crisis and that will make the power/eskom woes look like kindergarden stuff. Prepare folk. Get the gennies and the rain water tanks, etc set up.

Compared to our northern neighbours (and I mean the SSA Region) we’ve had it good – this will not last. I’ve been there, lived there and know what they experience. Hier kom groot k*k…

A customer to pay 42% more just for being inside the CoJ service area is crazy!

Should there be own City power generation and superb power reticulation as well as problem-free billing, you might get away with 25%

As we all know the truth is about 180 degrees from the above ideal.

End of comments.

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