The electricity crises and short-circuiting city power reticulation

In times of crises the urge to centralise power and to be opportunistic in settling old scores is always present. South Africa's electricity crises is no exceptance. The CEO's of the National Energy Regulator of SA (Nersa), Smunda Mokoena and the CEO of the Electricity Distribution Industry Holdings, Phindile Nzimande, are calling for municipalities to be stripped of their (constitutional) powers to reticulate electricity to their customers.

According to Business Day, both argue that infrastructure at local level is in a state of collapse and that municipalities were such inefficient distributors of electricity that they were harmful to the economy. For full article see Business Day.

Such a move, apart from being unconstitutional and somewhat utopian, will have severe impacts on South African cities coping with years of backlog of local infrastructure. According to a draft (as yet unreleased) paper by the Sustainability Institute on natural resource-based services in the City of Cape Town (see earlier blogpost for background), the reason for this infrastructure backlog stems from the challenge to expand services into poorer areas, while maintaining standards throughout the City. Electricity and water services traditionally cross-subsidised this roll-out, at expense of infrastructure maintenance. Thisis unsustainable and it is realised that alternative ways of financing such expansion should be sought.

Here a few extracts from the paper:
Despite the many political changeovers in Cape Town’s municipal government since 1994, a constant theme of successive administrations has been the need to address the service backlogs in the poorer areas of the city. This has had major implications for capital and operating expenditures in the energy, waste, water and sanitation (EWWS) sectors which together account for the bulk of expenditure by the CCT.

The core challenge that has faced officials since 1994 has been to find fiscally viable ways to expand the EWWS services into poorer areas while maintaining and operating the EWWS services for the city as a whole.

To complement the progressive aims of rates and tariff policies, the general approach to services from the mid-1990s onwards was that the levels and standards applied in the former white areas must be applied to all areas. This had major implications for capital budgets, reinforced by increasingly large inter-governmental transfers. However, it is one thing to extend infrastructure using capital budgets and transfers, it is a completely different matter to make sure that operating budgets are expanded accordingly in order to maintain and repair these infrastructures into the future, and provision is made in capital budgets for refurbishment and upgrade.

From 2005 onwards, municipal engineers and the consulting industry were issuing strong warnings that cross-subsidisation coupled to funding of service expansion to achieve uniform levels and standards of service were undermining the operating budgets. By 2006, major infrastructure projects had to be postponed and serious disruptions due to under-maintained infrastructures began to emerge. In 2007 the municipality declared restrictions on new developments in numerous suburbs due to overloading of existing bulk infrastructure, in particular sanitation. These, coupled to rising levels of bad debt, reinforced calls to move towards a sectoral cost recovery model. By the start of 2007, there was a general consensus that the rollout of basic services to meet the needs of the poor could no longer be at the expense of essential maintenance and refurbishment of existing city-wide infrastructures.