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In a precedent-setting move, Ulundi municipality in KwaZulu-Natal has decided to cut Eskom power supply agreements, saying the tariff hikes had drained its coffers and the governments plan to supply electricity to all by next year was not viable. File photo: Dumisani Sibeko
Durban – In a precedent-setting move, Ulundi municipality in KwaZulu-Natal has decided to cut Eskom power supply agreements, saying the tariff hikes had drained its coffers and the government’s plan to supply electricity to all by next year was unviable.
The municipality said on Wednesday it owed the parastatal R10-million, could not meet the tariff increases and had resolved to hand its ageing infrastructure, liabilities and customer base to Eskom who, with the national energy regulator (Nersa), it said, must administer resident supply.
The municipality’s Nkosenye Zulu said it was a case of “enough is enough”.
“The decision to roll out electricity to all households by 2014 was taken by the national government. There has to be a synergy between Eskom and the national agenda. Eskom was allowed to increase costs by a huge amount. This controversy is not surfacing for the first time and for municipalities like ours to continue to supply electricity is not viable. Our residents are indigent, we don’t have industries to cross-subsidise the costs. We can’t fix our roads because we are paying the electricity bill.”
While KZN local government spokesperson Lennox Mabaso said he believed Ulundi was an isolated case, Mthobeli Kolisa from the South African Local Government Association said others were in the same position.
Kolisa said he had received the notice from Ulundi and was urgently setting up a meeting with Nersa and town officials. He said a common tariff for bulk electricity supply to municipalities was not feasible.
“There are many who are unable to pay bulk electricity tariffs, particularly in winter. Their income is lower than expenditure. We are looking at ways to support them and re-looking at tariffs for them,” he said.
Mabaso said the town’s decision to terminate the service agreement with Eskom was receiving urgent attention and they were hoping to find “better options”.
He warned that the decision had ramifications for the municipality relating to the Municipal Finance Management Act.
Kolisa said the act required the provincial government to assess the viability of the municipality if they declared they were unable to pay Eskom.
“This is a particular action that must be taken by the province and this decision (to terminate the supply agreement) cannot be taken in isolation and without all the facts.”
The Ulundi council said price increases in the 2011/2012 financial year for residents were as high as 20.83 percent while Eskom increases were 26.71 percent. This year they had increased the price by 11.3 percent while Eskom’s tariff had gone up 16 percent. Forecasts suggest next year the price will go up for residents by seven percent while the Eskom increase is scheduled at eight percent.
Further, in the statement, Eskom is charged with putting municipal budgets under pressure as they adjust their tariffs in April each year while municipal adjustments are in July, when the financial year begins.
While Eskom spokesperson Hilary Joffe did not rule out that other municipalities could do the same, she said the parastatal was a bulk supplier and could not take over individual billing responsibilities and the maintenance of municipal infrastructure.
She agreed it was a “difficult situation” and that small municipalities without adequate rates bases were struggling to meet increases. – The Mercury
