The department of energy on Tuesday proposed a new model of finding additional funding for electricity infrastructure maintenance but it was met with little enthusiasm from Eskom and the National Energy Regulator of South Africa.
As explained to the portfolio committee on energy by the department’s acting chief director for electricity policy, Thabang Audat, the funding plan would see municipalities use the money ring-fenced in their tariff structures for maintenance, to service fresh debt founded on government guarantees.
He said it was crucial to find a sustainable funding model to address the maintenance backlog because it had reached proportions where there was a risk that additional capacity being generated could not reach consumers.
Government figures put the maintenance and rehabilitation backlog of the grid at R68-billion three years ago and infrastructure experts have warned that any future blackouts would more likely be the result of dilapidated infrastructure than supply constraints.
Audat said the department has ruled out tariff increases or asking National Treasury for more funding to help municipalities in this regard, as Nersa already factored in five to eight percent in electricity tariff increases to cover maintenance.
“There will be no additional funding from the fiscus because five to 8% of the tariff increases approved by Nersa is already earmarked for maintenance,” he said.
Nor could the department motivate for bigger tariff increases while municipalities were collecting tariffs with maintenance fees factored in yet not spending it for that purpose, but often on social infrastructure.
The department has concluded, he said, that the most practical funding option would be a central loan facility, such as one of the development finance institutions, including the Development Bank of Southern Africa, the Public Investment Corporation or an international lender body.
It was proceeding with discussions to this end, he added, and stressed that there needed to be proper, centralised governance fund for the maintenance if it were established.
Eskom’s group director for distribution Ayanda Noah said the power utility, which has a guarantee facility of R350-billion, believed that it was more desirable for electricity provision to become a self-sustaining exercise, than to source more outside funding.
“At Eskom our view is to reduce our reliance on the fiscus and guarantees to be able to run the business as a standalone business.”
Audat noted that municipalities were already relying on the private sector to assist with maintenance as it lacked the capacity, and said forcing them to use funding as intended could trigger a collapse of social infrastructure.
Asked about Eskom’s view, he suggested it might be coloured by the strife between the utility and municipalities over distribution and local government’s collective outstanding debt of R9.6 billion to Eskom.
Nersa’s Mbulelo Mcetezo, the full time member responsible for electricity, said the regulator needed time to mull the department’s proposal.
“We have not at Nersa sat down and discussed it so I don’t think it would be fair to pronounce on it. So right here we cannot say this is our view.”