Fourteen municipalities remain at risk of having their electricity supply cut off by Eskom, with none having concluded the required Distribution Agency Agreement (DAA) ahead of Tuesday’s deadline.
The municipalities were given until 1 September to reach an agreement with Eskom as part of measures aimed at addressing their substantial electricity debt and preventing interruptions to supply.
The situation has raised fresh uncertainty for residents and businesses in the affected municipalities.
Municipalities were initially required to adopt council resolutions indicating that they were willing to appoint Eskom as their electricity distribution agent before proceeding with the legally prescribed process for concluding a DAA.
What The Eskom Agreements Mean
A DAA allows Eskom to temporarily take over the electricity distribution function of a municipality in exchange for a fee.
Under the arrangement, money paid by consumers for electricity goes directly to Eskom rather than through the municipality.
Eskom deducts the amount owed for bulk electricity supplied, together with its approved cost of service, before transferring the remaining funds to the municipality.
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There are currently four municipalities operating under such agreements.
However, the arrangements have attracted controversy, including questions about their legality.
National Treasury previously criticised Eskom’s original DAA template as being heavily weighted in favour of the power utility.
A working group involving Eskom, National Treasury, Salga and the departments responsible for electricity and energy and cooperative governance was expected to develop a more balanced agreement, but that process has not yet been completed.
Despite this, Eskom recently entered into a new DAA with Ditsobotla municipality.
Eskom Municipal Debt Reaches R119 Billion
The dispute comes against the backdrop of mounting municipal debt owed to Eskom.
Municipalities collectively owe the power utility about R119 billion, with the debt regarded as one of the major threats to Eskom’s financial sustainability.
In May, Eskom said nine municipalities had adopted the council resolutions required as part of the process.
They were Nketoana, Mpofana, Masilonyana, Nala, Ngwathe, Renosterberg, Thembelihle, Govan Mbeki and Kgetlengrivier.
Ekurhuleni also reached a payment agreement with Eskom, while Inxuba Yethemba agreed to pay for electricity upfront.
Under the latter arrangement, Eskom supplies only the amount of electricity the municipality can afford.
Both municipalities were subsequently removed from the list of those facing possible supply interruptions.
Court Action And Municipal Struggles
Dr Beyers Naudé has since secured a court order preventing Eskom from cutting its electricity supply while the municipality follows the prescribed process for potentially outsourcing its distribution function.
The legality of DAAs is also being challenged in court, with AfriForum seeking to have Eskom’s agreement with Merafong set aside.
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Meanwhile, concerns about the process remain in municipalities such as Masilonyana.
DA councillor Marieta Visser said there had been no progress on the legal steps that should precede a DAA in the Free State municipality.
Masilonyana is currently under administration, while its municipal manager and chief financial officer have been suspended and are challenging their suspensions in court.
The municipality is also dealing with a workers’ strike that began in June, accumulating waste and water supply problems.
Will The Eskom Deadline Be Extended?
Salga has asked National Treasury to give affected municipalities an additional six months to conclude the agreements.
With the 1 September deadline now approaching, Treasury said it was considering the information submitted in support of the request.
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The department said it would communicate its decision to the affected municipalities shortly.
For now, the absence of concluded agreements leaves residents in the affected towns facing uncertainty over what will happen to their electricity supply if no alternative arrangements are reached.
