Document

Report
Sicelo Xulu
November 2014
In areas where Eskom is the licensed electricity distributor, there are no
Service Delivery Agreements (SDAs) between Eskom (service provider) and
municipalities (service authorities) in terms of the Municipal Systems Act 32
of 1998. This renders the service authority less effective due to
Loss of revenue
Lack of credit control
Public lighting issues
IDP alignment issues
Inhibited information sharing
Constrained economies of scale
Disparate service and tariffs
What is the best
way to resolve the
impasse between
Eskom and
municipalities?
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
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The Municipal Systems Act provides for municipalities (service authorities) to
engage or contract external parties (service providers)– it demands a Service
Delivery Agreement (SDA) between the municipality and the service provider
Eskom has resisted efforts to enter into an SDA with municipalities on the
basis that it is licensed by NERSA to distribute in specified areas
NERSA issues a distributor license to Eskom without a Municipal Council
Section 78 decision regarding service delivery mechanisms in the municipal
area or entering into an SDA with the municipality
Engagement with Eskom on concluding an SDA subsequent to the 2011
SALGA National Conference has failed to move the position forward (despite
agreement in principle by the CEOs of Eskom and SALGA)
Approaches by SALGA and some of the Metro’s regarding consolidation of
areas of supply have similarly met with little success
2013
Eskom and SALGA CEO’s
agree in principal that
SDA(s) need(s) to be put
in place
2014
SALGA /Eskom legal
teams to agree on
content of MOU and
Framework Agreement
April – first draft Position Paper on Alternative Approach to
Restructuring of EDI: Output Two
May
•
National Stakeholder Workshop re Alternative Approach to
Restructuring of EDI
•
SALGA draft SDA to munics for comment
July
•
CoJ/Eskom meeting Feasibility Consolidation of Service Delivery in
CoJ
•
SALGA Position Paper Proposed Approach to Restructuring of EDI
September – Strategic Session to expedite roadmap approach to
National Electricity Framework Agreement and MOU between SALGA
and Eskom
November
•
SALGA National member Assembly – scheduled sign of MOU does
NOT take place
•
SALGA/NERSA/DoE discussion of way forward and comments of
Draft SALGA/Eskom Electricity Distribution Framework Agreement
•
Local Government Position Paper presentation (AMEU Technical
Committee)
February – Report on SALGA/Eskom
engagements on draft EDI Framework
Agreement where Eskom the service
provider
March – half day workshop re content and
structure of AMEU position paper
AMEU takes decision to adopt a
two pronged approach – push for
SDA whilst collaborating to
achieve consolidation of areas of
supply
July – SALGA/NERSA meeting
•
Lobby support for SDA’s where Eskom
service provider
•
Reform of EDI
Legal teams to chart way
September – legalforward
opinionand
received
SALGA(MHA)
to
engage relevant Ministers
November – full presentation on
SALGA/Eskom Position Paper (Technical
Committee Meeting)
Eskom requests more
legal consultation





Is Eskom engaging in good faith?
Is it fair to expect Eskom to give up its market share and
dominance over municipalities?
Identification of all stakeholders and what are the constitutional
right and legal requirements for all the institutions in this
process?
What is the best way to resolve the impasse between Eskom and
municipalities in the best interests of the industry, the economy
and the country?
Who is benefiting most/least from the current situation?
Is there a sincere desire to improve service delivery, business sustainability
and risk mitigation by all stakeholders
Strategic considerations
Holistic approach
Customer service
Infrastructure
Employees
Capital investment
Technology
Asset value
Financial
Bulk supply
Legal
Debtors book
Stakeholders
6
Challenges (examples)
• Potential financial losses
Rational
Emotional
Win
Political
Complexities and challenges to be
managed by the project team
7
• Labour and staff
resistance
• Potential customer and
community resistance
• Absence of current
business readiness
• Capital required for
upgrading
• Lack of customer,
community and
stakeholder support
To consider and decide on the merits of following a different approach
to resolving the Eskom/Municipality relationship issues. AMEU is
proposing a two phased approach:
1.
2.
Get NERSA to include SDA with municipalities as prerequisite part of
the Eskom tariff approval.
Start the process of consolidation of electricity service delivery
within the area of jurisdiction of municipality (with a joint project
team)
in the best interests of the industry, the economy and the country
2013
Eskom and SALGA CEO’s
agree in principal that
SDA(s) need(s) to be put
in place
2014
SALGA /Eskom legal
teams to agree on
content of MOU and
Framework Agreement
April – first draft Position Paper on Alternative Approach to
Restructuring of EDI: Output Two
May
•
National Stakeholder Workshop re Alternative Approach to
Restructuring of EDI
•
SALGA draft SDA to munics for comment
July
•
CoJ/Eskom meeting Feasibility Consolidation of Service Delivery in
CoJ
•
SALGA Position Paper Proposed Approach to Restructuring of EDI
September – Strategic Session to expedite roadmap approach to
National Electricity Framework Agreement and MOU between SALGA
and Eskom
November
•
SALGA National member Assembly – scheduled sign of MOU does
NOT take place
•
SALGA/NERSA/DoE discussion of way forward and comments of
Draft SALGA/Eskom Electricity Distribution Framework Agreement
•
Local Government Position Paper presentation (AMEU Technical
Committee)
February – Report on SALGA/Eskom
engagements on draft EDI Framework
Agreement where Eskom the service
provider
March – half day workshop re content and
structure of AMEU position paper
AMEU takes decision to adopt a
two pronged approach – push for
SDA whilst collaborating to
achieve consolidation of areas of
supply
July – SALGA/NERSA meeting
•
Lobby support for SDA’s where Eskom
service provider
•
Reform of EDI
Legal teams to chart way
September – legalforward
opinionand
received
SALGA(MHA)
to
engage relevant Ministers
November – full presentation on
SALGA/Eskom Position Paper (Technical
Committee Meeting)
Eskom requests more
legal consultation
•To make concluding an SDA with a municipality a
license condition for distributors (service providers) in
line with existing legislation
SALGA engages
NERSA
•Regarding interpretation of the Constitution, existing
legislation and regulations (particularly w.r.t. SDA
regulation requirements)
Legal Opinion
sought
Working Group
established
?
•Comprising SALGA, AMEU, Eskom, NERSA, DoE and
DPE representatives
•To map the journey to culminate in consolidation of
supply rights
Legal opinion provided by
Leslie Mkhabela and Jim Matemane
of Mkhabela Huntley Adekeye Inc
(MHA)
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

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In terms of the Systems Act, a municipality has executive authority over
electricity reticulation services in its area of jurisdiction. This includes the
power to provide or regulate how electricity reticulation services are provided
within its area of jurisdiction.
If a municipality decides not to distribute electricity itself, it must conclude
an SDA with the person who reticulates electricity in its area of jurisdiction.
An SDA is required even where an entity is an organ of state that is licensed
in terms of another legislation to provide such particular service
The Electricity Regulation Act recognises that a municipality has executive
authority over reticulation services as defined in the Act. Within this
context, the Electricity Regulation Act further recognises that provision of
reticulation services within a municipality’s area of jurisdiction will require a
conclusion of an SDA and accordingly regulates how such SDA’s should be
concluded.


Eskom is required in terms of the law to conclude SDA’s with
municipalities in whose areas it distributes electricity; and
The fact that Eskom holds a licence issued to it by NERSA to
distribute electricity does not exempt it from complying with the
provisions of the Systems Act. To the contrary, the Electricity
Regulation Act recognised that entities licensed by NERSA to
reticulate electricity within the area of jurisdiction of a municipality
will be required to enter into an SDA with such municipality.
MHA
SALGA engages
NERSA
•To make concluding an SDA with a municipality a
license condition for distributors (service providers) in
line with existing legislation
Legal Opinion
•Regarding interpretation of the Constitution, existing
legislation and regulations (particularly w.r.t. SDA
regulation requirements)
sought
Working Group
established
?
•Comprising SALGA, AMEU, Eskom, NERSA, DoE and
DPE representatives
•To map the journey to culminate in consolidation of
supply rights
Stakeholder Engagement:
What
Provide SALGA with the Legal opinion for
discussion and engagement with NERSA and
other stakeholders
Formulate a working group comprising SALGA,
AMEU, Eskom, NERSA, DoE and DPE
representatives to map the journey to culminate
in consolidation of supply rights
Who
By When

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