It’s hard to imagine – four small rural towns in South Africa where the electricity network is “excellent”.
This achievement has seen the municipality invest an average of around R11 million to upgrade the network every year for 11 years (a total of R120 million). The rate increase is lower than allowed by Nersa. Latest Eskom bill. And this is not the case in the Western Cape.
This is real, and given the dysfunction in small town municipalities, it’s no surprise to learn that it’s delivered by private sector distributors – in an extraordinary scenario.
In this approach, a private entity – Rural Maintenance – will take over electricity distribution and billing in the municipality (the rates are still regulated by the municipality, which has been in administration since 2017).
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Much of the electricity supply responsibility will be transferred to Pedesaan but, importantly, the network assets will remain municipal property (excluding Namahadi in Frankfort, where customers are supplied directly by Eskom).
‘No privatisation’
In the municipal bid compliance notice, it is emphasized that “there is no privatization”. The network (and any added assets) will be transferred free of charge to the municipality at the end of the contract period.
The contract runs for 25 years and is almost halfway through. Aside from the R120 million invested in the network, Rural has paid R22.2 million in royalties to the municipality and a total of R709.4 million to Eskom (on behalf of the municipality) for bulk electricity.
Bad debt write-offs are 0.5% (65%) of the total base of nearly 13,000 customers.
The number of full-time staff members has increased from 12 to 40 in 11 years. The network is regularly monitored by Nersa, and Rural says technical and non-technical losses are “around 6%”.
This is great.
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It is not uncommon for this to be more than 20% in the same municipality. Technical and non-technical losses (effectively theft in the latter case) at Joburg’s City Power totaled 29% in 2020/21, although this was on a very large network.
‘Methodology’ is its own burden
Rural convinced Eskom to allow to implement a different load shedding “methodology” in a three-month trial from 1 February.
Instead of switching off the entire city of Frankfort, it has been divided into four main zones, with the zone switched off for one-and-a-half to two hours instead of the ‘standard’ two to two and a half hours, as in other countries.
He said: “We need to find a way to reduce the impact on different types of consumers who have different needs. A one-size-fits-all approach is fine when it comes to offloading every once in a while – but this approach is unacceptable when offloading continues- continuation in the next two or three years.
Under the new methodology, Rural controls the load in Frankfort and ensures that the municipal water and sanitation pumps are open 24 hours a day.
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It said because the overall network remains energized (versus the city being turned off by Eskom), this will reduce cable theft. There is already evidence that this works.
Food producers are among the priorities
Two large power users in Frankfort are supplied according to the new methodology.
Pedesaan said that “usually, such producers prefer to rest for nine hours and live for 15 hours during the stage 6 load period. (This will not work for home or commercial users but is important for food production)”.
The rural test load shedding schedule is appropriate, as these large power users are on their own high voltage feeders (and therefore have two additional ‘zones’ or blocks).
There are more…
The next step is to use some 3 780kW generated by a solar plant that has been built outside the city by 19 community members and Rural Maintenance.
He said Frankfort uses around 6 500kW at peak. An additional 1MWh battery pack is in place, which Rural uses to “reduce strain on Eskom during peak periods”.
Blue print?
Rural is headquartered in Pretoria and was established in 1993, when it provided electrical maintenance services for Eskom’s rapid electrification programme.
Since then, in addition to Mafube, it has taken over operations and maintenance for three municipalities in Namibia.
The local council itself is certainly not a big fan of this kind of idea, as it would deprive it of a significant part of its revenue.
Generally, this income is used to pay salaries and not Eskom, which leads to situations such as the 16 municipalities in the Free State that owe Eskom R17 billion (by October 2022).
However, not only is the contract watertight, but Eskom certainly does not want the municipality to reassume its role because it still owes millions of utilities from more than a decade ago. In 2011, Eskom had a debt of R23 million. In 2019, this has reportedly increased to R52 million.
In 2020/21, Mafube’s average monthly collection rate is 20% (R2.1 million) which is not enough to meet the R9.1 million salary bill.
This article originally appeared on Moneyweb and is republished with permission.
Read the original articlee here.