Municipalities can make themselves some money by ditching Eskom

Many citizens of South African’s urban metropoles may not be aware of this, but they don’t exactly buy their electricity directly from Eskom.

Most metros rely on distributors to get the electricity around but the upshot is that most metros own their distributors.

So, in exchange for allegedly having a more efficient distribution network by keeping it local, we pay a little bit more for electricity and we get to live in sweet urban bliss.

That’s a great situation, since we should get double benefit. I mean, after all, the money municipalities bring in get spent in the municipality, right?

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Well sometimes in Dubai, but for the most part, in the city.

So, not only are we getting a more efficient and direct distribution as opposed to having Eskom dispatch people all over from Megawatt Park, we also get more money to spend on civic services, assuming of course, the municipalities spend that money on civic services.

That has always needed to be an assumption when doing this deal but now we have come up with another assumption on something we’d taken for granted – that the municipality has electricity to distribute.

That was easy to assume because Eskom could provide it and provide it cheap.

We’ve known for some time that Eskom was struggling to provide the electricity but now what they can provide has gotten so expensive, it will be difficult to justify higher margins.

The problem is that metros have gotten used to that sweet money. If you look at eThekwini, about a quarter of their revenue comes from selling electricity.

Obviously buying the electricity costs money too, so it’s not all profit but there’s still a good few million in that.

So, what happens when that goes away?

Not only do you lose a couple of jobs but you also lose a revenue stream. That must be rather scary to any municipal manager worth their salt when they start realising that an easy cash cow will dry up when their citizens go off-grid.

What can they do to respond? Raise rates? Charge the people still on the grid more? Cut services? Increase debt? None of those things seem particularly nice.

It stands to reason then that if metros want to keep their nice income, they need to take a step back and realise that they need to do something and do it soon.

Even if Eskom comes right and ends load shedding, it’s not like they will be bringing the prices down after years of increases. So, naturally, it will still be pretty expensive.

And as time goes on, if my electricity budget of R3 000 a month can be cut in half simply by moving to a better run city, I’ll move and save a lovely 18k a year.

As the price goes up, the better numbers make it seem more promising and then the more secure supply of energy could become a mere bonus rather than the draw card.

READ MORE: Metros in a race to get Eskom off their backs

So now is the time for municipalities to start considering the future and investing in it. If they want to hedge their bets on Eskom, all the power to them, hopefully.

If they want to build their own generating capacity, how they do that and when will be a difficult consideration.

What is certain is that the money won’t flow like it used to even when the electricity starts to flow again.

More importantly, if rich people can get off the grid but the poor are still forced to rely on Eskom and their local distributors, it could widen the void between rich and poor in the most unnecessary and unfair way imaginable.

Any municipality investing in their energy plan is, therefore, really invested in their future.