FAILING S.AFRICA: Johannesburg’s enormous Electricity Debt – Eskom and City of Johannesburg R4.9 billion debt dispute risks dark December for residents
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[Most of these indebted electric substations are actually all around the suburb where I live. Jan]
Eskom is threatening to cut off electricity to Midrand, Joburg CBD, Mnandi, Cresta and other areas as its R4.9-billion debt row with City of Johannesburg explodes. Johannesburg is also leading the charge with Gauteng metros against Eskom’s tariff hike proposal of 36.15% in 2025
Eskom’s unprecedented threat to cut power supply to South Africa’s largest city would leave the Johannesburg CBD and Midrand along with other nodes in the dark. The power utility has threatened the City of Johannesburg (CoJ) with power cuts from 14 December unless the city ponies up on its billing debt of R4.9 billion.
The full notice served by Eskom on the City shows that the power stations where the majority of the R4.9 billion billing debt has been racked up are:
Fordsburg substation: Supplying Johannesburg CBD, Fordsburg, Auckland Park, Mayfair and surrounding areas;
Beyers substation: Supplying Fairlands, Cresta and surrounding areas;
Crowthorne substation: Supplying Crowthorne, Carlswald, parts of Mnandi and surrounding areas; and
Allandale substation: Supplying Midrand.
The CoJ has denounced Eskom’s threat. “The City strongly condemns this move as unjust, counterproductive, and potentially harmful to the residents and businesses of Johannesburg.”
The utility will take representations until 8 December 2024.
While Cape Town is quickly catching up, Johannesburg remains the biggest contributor to South Africa’s GDP, and the cuts would harm growth prospects especially as they would be executed in the Christmas boom shopping period.
The CoJ says that it has long disputed R3.4-billion of the total claim by Eskom. “There are ongoing disputes regarding overbilling of R3.4-billion, with a pending appeal and monthly declarations since July 2024. The City has repeatedly raised concerns about this continued overbilling, which Eskom has failed to address, placing additional strain on the City’s resources.”
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The metro is in deficit and is loan-dependent as revenues tumble because of financial strain, semi-gration by wealthy residents and because electricity revenues (which make up almost one-third of its budget) were strained by rolling blackouts and the consequent migration to solar power.
The City is taking advice on “all available legal avenues” to stop the Eskom cut-offs. “Eskom’s approach of ‘pay now and resolve disputes later’ in its dealings with the City of Johannesburg can no longer go unchallenged. There is also the option of IGR (inter-governmental relations) to resolve inter-governmental disputes which Eskom keeps disregarding,” it said in a late-night statement.
In his May budget speech as finance mayoral committee member before becoming mayor, Dada Morero said:
“On the dispute between City Power and Eskom, the City is committed to the appointment of an independent mediator to resolve the current impasse between City Power and Eskom. Additionally, the matter is currently before the courts. As you are aware, the dispute involves Eskom’s claim that City Power owes Eskom R1.73-billion, and City Power’s counterclaim is that Eskom has potentially overcharged City Power by R3.32-billion on bulk purchases. As such, the aim of the mediation is to find a mutually acceptable settlement and avoid lengthy and expensive legal proceedings.”
The City did not say if the mediator had been appointed.
Eskom faces formidable opposition to its sky-high proposed tariff hike in 2025 from the three Gauteng metros, which were already all buckling from double-digit increases in 2024.
Neesa Moodley reported that Eskom has proposed a 36.15% electricity tariff increase for the 2025/26 financial year, effective from 1 April 2025 for direct customers. For customers supplied through municipalities, the proposed increase is 43.55%, starting 1 July 2025. These proposals are pending approval by the National Energy Regulator of South Africa (Nersa), which will hear representations from 18 November to 4 December.
The municipalities are set to oppose what they call “Eskom’s bullying tactics, such as property attachment without reconnection”, a source told the Daily Maverick before Eskom announced the cut-off. “They go around forcing these municipalities to sign payment agreements that threaten their sustainability and threaten to take away distribution licences”.
The source added that unsustainable tariff increases were threatening residents and businesses.
Read in Daily Maverick: Food or electricity — power tax forces a cruel choice on Joburg’s poorest people
In addition, the source said, overbilling was a long-standing problem and the City had taken Eskom to court on this. “We believe that by standing together, we can exert collective pressure on Eskom to honour existing agreements and processes, respect municipalities, give IGR mediation processes a chance when disputes arise, and adopt fairer practices.”
Electricity service charges make up almost a third of Johannesburg’s budget, and higher tariffs crowd out the City’s ability to fund its operations. It also means that as the Eskom cost goes up, more and more residents and businesses are hot-tailing it to cheaper renewable sources of energy creating an existential crisis for the city’s balance sheet. This is what underlies the dispute.
Johannesburg’s finances are in the red and in 2023, Morero (then Finance MMC) said the city had a monthly operating deficit of R4-billion.
“The City is losing a significant amount in electricity and water losses. We are required to inform the entire Joburg Family that we need a minimum of R4.3-billion per month to fund the City’s operations and deliver services to survive as the People of Johannesburg,” he said on 12 June 2023. Since then, the City’s finances have declined further, although it has taken a few development loans, one from the World Bank.
The summary of Eskom’s dispute shows there is still time to negotiate and senior legal sources with close knowledge say the utility is unlikely to cut off, but is probably making a political point as it fights high municipal debt of R90-billion.
Timeline: Eskom and City of Johannesburg dispute*
18 December 2023: CoJ and Eskom held a meeting to investigate allegations of overbilling. Both parties agreed that technicians would conduct meter verifications.
22 December 2023: Meter verification at selected substations took place. No metering faults were detected, and City Power confirmed accuracy.
30 January 2024: CoJ informed Eskom it would withhold payments due to overbilling allegations but provided no substantiation.
29 February 2024: A formal dispute resolution meeting was held under the IRFA, where workstreams were created. City Power eventually opted out of this process.
Various dates 2024: Eskom repeatedly invited CoJ to arbitration to resolve disputes, but CoJ declined to participate, withholding payments without evidence.
8 November 2024: Eskom issued a public notice on the outstanding debt and its intention to disconnect electricity supply to specific areas if payments aren’t made.
14 December 2024: Scheduled date for Eskom’s potential disconnection of electricity to certain Johannesburg areas if payments remain outstanding.
8 December 2024: Deadline for public submissions and comments on Eskom’s intended actions.
12 December 2024: Eskom’s deadline to communicate its final decision on whether to proceed with disconnections.
Public actions:
Affected individuals and parties can make representations or submit comments regarding Eskom’s intended action to cpsubmissions
The deadline for submissions is close of business on 8 December 2024. DM
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