New plan for electricity backlogs

The Department of Energy is proposing a new model to fund the backlog of electricity infrastructure maintenance and refurbishment – estimated to be about R70-billion.

The new model recognises that in the light of the constraints on the fiscus‚ no additional funding from this source will be forthcoming‚ nor are tariff increases an option.

Electricity supply director Thabang Audat said in a briefing to parliament’s energy committee that the maintenance backlog was deteriorating and not being addressed by electricity distributing operators.

Electricity distribution infrastructure was on average 40 years old and decaying and a sustainable funding model was required.

Grants from the government to municipalities were not effective, as the funds were used for purposes other than maintenance, he said.

The most practical funding solution was a central loan facility, with loans coming from development finance institutions such as the Development Bank of Southern Africa‚ Public Investment Corporation‚ the Industrial Development Corporation and international lenders, which would be provided with a revenue guarantee.

Audat said potential lenders wanted repayment guarantees, as well as regulatory certainty as conditions of granting loans.

Some of the revenue would have to be ringfenced to repay these loans.

Audat said there was already an allocation from the National Energy Regulator of SA (Nersa) of between 5% to 8% of the approved tariff, which was ringfenced for maintenance of infrastructure.

So there was funding in the system to repay the loans, he said.

The department wanted to obtain the necessary approvals for the funding model and establish a steering committee to spearhead it. Eskom officials said the entity planned to invest R37.7-billion between 2017-18 and 2021-22 on the distribution network.

A critical challenge remained the unpaid debt of about R11-billion.

Eskom customer services executive Ayanda Noah said electricity supply would be interrupted in the Eastern Cape from today, if talks did not succeed in addressing the non-payment problem.

Meanwhile, the department is planning to publish a notice which will exempt small electricity generators from having to apply to Nersa for a generating licence.

Audat said there were an increasing number of applications to generate electricity.

“Exemption allows Nersa to delegate the registration activity and management of small-scale embedded generators to Eskom and licensed municipalities and therefore manage the volumes within the agreed rules‚” he said.

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