Nelson Mandela Bay firms’ R200m electricity standoff

Stalemate over tariffs shackles city’s finances

The cash-strapped Nelson Mandela Bay Municipality is owed nearly R200-million in unpaid electricity bills by some of the metro’s biggest companies.

The number of companies involved in a longstanding dispute over the way the tariffs are structured has jumped from an initial 13 to at least 20 so far, as others jump on the bandwagon.

The companies, some of them high-energy users, have been paying only a portion of their bills since 2011, despite a deal last year which saw the metro write off about R245-million owed by them.

The agreement between the high-energy users and the municipality, approved by the council in June last year, was so poorly constructed that it failed to ensure the businesses paid their future bills in full.

As a result, some of them have only paid 79.23% of their electricity bills since July last year.

Although the deal was never made public, it is understood the agreement was that the companies had to prove they could not afford the high electricity tariffs and that their electricity bills comprised about 20% of their total costs.

The metro would then have to ensure that it structured a special preferential tariff for high-energy users.

The municipality introduced a cheaper winter tariff for those companies which spent large amounts on power in winter.

So instead of the 8% tariff increase normal residents had to pay from July 1 when the rates went up, businesses paid only 1% more – but only for the winter months.

They had to pay a higher increase for the rest of the year. At a budget and treasury portfolio committee meeting yesterday, councillors were told the companies felt the city had not stuck to its end of the bargain.

The companies withholding some of the money owed were not named.

Some of the companies are also involved in a legal battle with the National Energy Regulator of SA (Nersa) and the municipality over the way the electricity tariffs are structured.

The case will be heard in the Gauteng High Court at the end of next month.

Chief financial officer Trevor Harper wrote in his report to the portfolio committee that the stalemate with the companies was affecting the city’s finances.

“[It] is proving to have a detrimental effect on the current revenue collection rate of the municipal i t y, ” he wrote. “The current arrears [are] to the tune of R199-million.

“The [high-energy users group] are . . . only paying an amount equal to 79.23% of their electricity bills. “This seemingly protracted impasse with the [group] should be addressed as a matter of priority.”

The new political head of budget and treasury, councillor Retief Odendaal, said he had met some of the companies on Monday and it had emerged that they felt there had been a breakdown in trust between them and the city.

“We don’t want to fight with the employers of some of the residents of this city, but we have to be a responsible government and they have to be responsible too,” he said.

“We need to talk to the high-energy users and the first step . . . is to build a relationship of trust. “When an agreement is reached, it has to be one that does not put a burden on the city.”

ANC councillor Rory R i o rdan wanted to know why the issue had been allowed to “wobble on” for so long.

He also said some companies were just jumping on the bandwagon because their electricity bills were high and not because they were high-energy users.

“The municipality needs to get proper legal representation and sort this mess out once and for all,” he said.

Odendaal said the agreement made last year had neglected to deal with the way forward, which meant the city had written off millions of rands while the companies simply continued the following financial year to pay only a portion of their bills.

Harper said the R199-million owed by the companies had been racked up since July last year. The amount was disputed by Autocast South Africa’s Bay executive director, David Mertens, who heads the metro’s High Energy User Group.

“There is a substantial amount of money involved, but I do not believe it is as high as R200-million,” he said. The debt arose out of a dispute with Nersa over municipal tariffs, he said.

“The group has been involved in two different court cases, one from 2011 which involved Eskom and the other from 2013 which involves Nersa and the municipal tariffs.

“The case concerning the municipal tariffs will be heard in the Gauteng High Court on October 31.

“We will be taking steps to engage with the municipality in the near future as we would prefer to secure an agreement with the administration before the case proceeds to court.”

The metro will meet the high-energy users on Friday in the hope of finally putting to bed what has been a rocky relationship between big business and the municipality since 2009.

The municipality said it wanted to lay to rest claims that it was making a large profit from electricity sales, saying it only made a 2.2% profit, which was used in service-delivery projects.

Meanwhile, Harper reported to the portfolio committee that the city had recorded R48.7-million in electricity losses just for July.

For the 2015-16 financial year – from July last year to June this year – the metro lost R291-million due to theft and technical losses.

The committee also approved a new system yesterday that would see residents’ electricity cut within 45 days of them not paying their accounts.

However, this still needs to be approved by the mayoral committee and full council before it is implemented.