Municipality loses millions when Eskom is load-shedding

also seems to be a problem, with the outstanding debts for electricity usage at the end of June 2022 standing at R179,35 million. Of this amount, R43,73 million lies in the “danger” area, where the debt is older than 120 days.

The latest AFS makes provision for writing off R77,96 million in electricity debt, and R96,43 million in interest. The total income derived from interest in 2021/22 was R31,24 million.

By Anton van Zyl

Many local residents and businesses complain about the devastating effects of Eskom’s load-shedding. Municipalities, however, are just as badly affected and stand to lose tens of millions in revenue if the current load-shedding schedules continue.

Local municipalities such as Makhado Municipality rely on the reselling of electricity as a primary earner of income. In the 2021/22 financial year, service charges (mainly electricity and refuse removal) added R402,49 million (35,2%) to the municipal fiscus. The only other contributors that exceeded this were the government grants and subsidies, which brought in R558,02 million (48,8% of the income).

In the municipality’s latest available annual financial statements (AFS), the bulk purchases of electricity from Eskom are reflected as amounting to R306,3 million. Electricity sales to consumers are recorded as totalling R388,76 million, leaving a gross profit of just over R82,46 million. This number is a lot lower than the year before, when the sale of electricity was just over R435,8 million and Eskom’s account was R275,6 million. (A profit of R160,2 million).

Use it or lose it

For the past few months, the load-shedding schedules have varied between Stage 2 and Stage 6. In real terms, this means that the power is cut off anything between two and 10 hours per day. The past week, the electricity was off for an average of six hours per day.

Even if one would reduce the average to four hours per day, that would mean an effective loss of 16,7% per day. If this pattern continues for a full year, the municipality will lose, based on last year’s figures, an estimated R13,7 million in income.

The direct loss in revenue is also not the total loss. Throughout the country, illegal connections and cable theft have escalated, which would mean additional losses. The municipality, like most other institutions, would have to make use of emergency backup generators, which will cause operating expenses to escalate.

To add to the municipality’s financial woes, many consumers have installed solar energy systems at their businesses or homes the past year in response to the electricity blackouts. This means that energy is not tapped from the grid but from renewable resources. Although this is excellent of electricity per day in 2021. “My mother-in-law lived with us for part of 2021, so we had an extra person in the house,” he explained. In the first eight months of 2022, the usage dropped to an average of 24,6 units per day. The past four months it dropped further to 22,11 units per day.

In July last year, prepaid electricity cost him R2 600. The next month cost R1 700. As consumers with prepaid year, his electricity cost was R1 400 and they even had family visiting over the period.

We also compared the account of a residential user staying in a much bigger house with no prepaid meter. Here the average electricity consumption for the first nine months of 2022 was 45,06 kWh per day. Between September and December, it dropped to 32,84 kWh per day. This means a difference on the account of R600 to backup system. This was followed a month later with a small solar installation to supplement the power. The consumption in the last three months of 2022 was an average of 41,69 kWh, which also meant a saving of roughly R820 per month on the business’s electricity bill.

Will the municipality shop around for other sources?

The announcement by President Cyril Ramaphosa last week that people with rooftop solar panels would soon be able to sell excess power back into the grid was generally welcomed. This means that a municipality such as Makhado can supplement its electricity with a “green” feed from local suppliers.

R700 per month.

At a business premises in the centre of town, load-shedding and the installation of a solar system made a big difference. In 2021, the business used on average 59,4 kWh of electricity per day. Over the first nine months of 2022, with load-shedding being very much part of the everyday problems, the consumption dropped to 54,3 kWh per day.

Some was lost and some not paid for

As is the case with many other electricity distributors, Makhado also had to contend with “lost” kilowatt/ hours. Makhado Municipality’s losses in 2021/22 amounted to about 9%, or R24,76 million. This is slightly down from the previous year’s R29,53 million.

The losses are attributed to “illegal connections to the electricity network and bridging of meters by consumers”, the municipality states in its AFS. An average price of R1,34 per kilowatt hour was used by the municipality to calculate the loss.

The non-payment of accounts news for the environment, it means that less electricity from the grid is being consumed, which means less profit for the municipality.

But I do not see it on my account!

Many residents will argue that even with the extended power outages, they do not see any reduction in their electricity bills. This, however, is not the case. We analysed a few electricity bills and found that the “saving” because of load-shedding (based purely on electricity usage from the grid) was significant.

A consumer with a pre-paid meter living in a three-bedroom house in town used on average 30 kWh meters know, electricity becomes very expensive if you use more than a certain number of units. In January this

Sadly, any saving in cost would have been gobbled up by the cost of running generators to keep the business up and running during load-shedding

In October last year, the business installed an inverter with a battery

In Cape Town, the metro was very keen to start buying from independent suppliers and the National Energy Regulator of South Africa (Nersa) has approved a rate of 78.98c/kWh for the city to pay power sellers. The City of Cape Town, however, decided to add a 25c/kWh incentive tariff on top of this to encourage more businesses and residents to do this.

We sent through questions to the Makhado Municipality last week, asking them whether they had any such plans in place, whether measures existed to help absorb the losses incurred because of load-shedding and whether additional measures would be taken to collect the outstanding electricity debt.

At the time of our going to press, no reply was forthcoming. If a response is received, a follow-up article will be published.

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