May 18, 2004
By Thomas Thale
IN a move that will herald the end of City Power in its current form, the City of Johannesburg has set up a steering committee to investigate how best to restructure the provision of electricity in terms of a government decision to regionalise electricity provision.
The steering committee will look at the implications of the restructuring and make recommendations to council on how best to implement the decisions that will see City Power incorporated into one of the new Regional Electricity Distributors.
Cabinet, in 2001, decided that six Regional Electricity Distributors would replace all electricity distribution functions provided by the municipalities and by Eskom Distribution. The establishment of these distributors was designed to streamline electricity delivery throughout the country, making it more efficient and cost-effective.
The Department of Minerals and Energy, the National Electricity Regulator, Eskom and the South African Local Government Association subsequently signed a cooperative agreement, endorsing the decision.
The Electricity Distributors Industry Holdings (EDI), a government-owned company, was set up in 2003 to oversee the setting up of the regional distributors.
Each municipality was given the task to draw up an accession agreement on the restructuring and with this in mind the City of Johannesburg and EDI have formed a steering committee made up of representatives from the Contract Management Unit, the Shareholder Unit, the City's Finance Department and City Power.
Joburg councillor responsible for municipal services, Brian Hlongwa, said the committee would report its findings and recommendations at the next sitting of the mayoral committee. The report will focus on the implications of the restructuring process for City Power, "the constitutional implications for the City as the local sphere of government, and the financial implications for the City, as the parent municipality for City Power".
City Power, a council-owned utility, is currently Joburg's major electricity supplier, but will soon become a critical component of the new electricity delivery structure.
This transition will have far-reaching implications for electricity provision in the City and will see the assets, liabilities, personnel and obligations of electricity distribution entities being transferred to the newly created region four distributor.
City Power's president and CEO Mogwailane Mohlala said he expected the process "to be objective and take into account all the factors and variables necessary to contribute towards the establishment of a distribution company".
Mohlala did not anticipate workers being retrenched as a result of the restructuring. "The idea of the whole process is not to lead to job losses, but to use the resources available to perform the activities that need to make the business model a success."
City Power has been an important source of revenue for the City and Hlongwa expressed confidence that the restructuring would not adversely affect Johannesburg's ability to generate revenue. "The whole process around what would be retained by the City with regard to electricity revenue forms part of the framework that the co-operative agreement will begin to address. We are of the view that the process as a whole is premised on the idea that municipalities will not be left worse off financially," Hlongwa added.
The restructuring process will culminate with the City signing a co-operative agreement with EDI Holdings, paving the way for City Power to be incorporated into the newly established distributors network.
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