November 4, 2005

THE government has backed down on its plan to restructure the R30-billon electricity distribution industry after fierce opposition from smaller municipalities that feared losing revenue, according to a report in Business Day today Initially the government intended to merge Eskom's seven distribution business units and those of the 187 licensed municipal distributors to form six regional electricity distributors (REDs).

The merger was aimed at:

• eliminating the 2 000-plus tariff structures that exist between the licensed municipal electricity distributors and Eskom;
• improving the quality and ensure the reliability of power supply across South Africa.

According to the newspaper, the Department of Minerals and Energy said yesterday it was considering establishing a seventh national distributor to "mop up" those smaller local authorities that declined to join the other regional distributors. The broad objectives remain the same.

The smaller municipalities would also have a choice of which regional entity they wanted to join, the report said. Under the current plan, the government had grouped municipalities into six clusters, each supported by a strong metropolitan area. Participation in the formation of regional distributors is voluntary, and since there is no legislation compelling municipalities to participate in the restructuring process, some have simply rejected it, the report says.

The department's deputy director-general for electricity and nuclear energy, Nelisiwe Magubane, is quoted in Business Dayas saying that cabinet had approved the Electricity Distribution Industry Restructuring Bill, which would compel municipalities to join one of the regional electricity distributors. Magubane said details of the model, which would provide guidelines on how to compensate Eskom and municipalities for their assets transferred to the regional distributors, would be presented to Parliament next March.

The department had said profits and dividends earned by the REDs through levies would be shared in proportion to the assets contributed by all participants.
Source: Business Day
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