The Midvaal Municipality in Gauteng intends to ditch Eskom and outsource its electricity supply to a private energy company in a bid to boost revenue and also reduce dependence on state-owned entities.
The initiative is designed to address maintenance backlogs and ensure long-term financial sustainability.
The decision follows the ongoing public hearings conducted by the National Energy Regulator of South Africa (Nersa) regarding Eskom's application for an electricity tariff increase for the upcoming year.
In response, Midvaal is set to implement a 20-year public-private partnership (PPP) for electricity procurement.
Using municipal employees, the commercial partner will manage the network for at least three years.
Currently, proposals are being received for the project from Chinese and American companies.
The continuing municipal power crisis can be resolved using this concept, according to the South African Independent Power Producers Association (SAIPPA).
Strong governance is well known in the Midvaal, which Ratings Afrika regularly acknowledges for its sound financial standing.
Speaking to Newzroom Afrika, Democratic Alliance Mayor Peter Teixeira said this decision was influenced by a grid study they did five years ago which revealed that the infrastructure was aged and would cost the municipality more than what they could afford.
However, Teixeira explained they would not be ditching the power utility completely because it owned a large chunk of infrastructure in the area.
“This is just to ensure that we open up an element of independent power producers who can also go through the triple P and be able to supply us with green energy,” he said.
He added that this would be a competition to Eskom and “this means that residents can pay a lower fee for electricity opposed to the high tariffs that Eskom implements year in and year out”.
Teixeira said this will also help them escape load shedding.
Given the challenges that Eskom has faced in recent years, he stressed that they could not sit back and rely on the power utility.
He emphasised that this would be good for the residents, businesses, and also the economy of Midvaal.
This means that Eskom's mounting debt problems could worsen if it loses one of its more dependable paying clients, particularly as other municipalities keep falling behind on their payments.
According to the most recent report, Eskom is currently dealing with an enormous debt of around R90 billion that municipalities owe it. This is largely due to non-payment and poor revenue collection.
In an attempt to collect unpaid debts, the utility recently had to threaten to turn off power to the City of Johannesburg, which is said to be the richest municipality in the nation.
In certain instances, Eskom has been forced to take over the electricity supply in smaller municipalities that have been unable to pay their overdue bills, and it has been forced to file lawsuits against municipalities like the City of Tshwane.
Given Eskom's proposed tariff increases for the upcoming three years are currently up for public comment, residents may experience extreme financial hardship if the parastatal’s appeal is accepted.
In August, Eskom proposed to Nersa, a 36.15% tariff hike for the 2025 fiscal year, with increases of 11.81% in 2027 and 9.10% in 2028.
IOL Politics