Municipalities caught in 'utility death spiral'
Local government margins from power sales are declining while some municipal electricity departments are already loss-making
It’s widely recognised that Eskom in its current state is not sustainable and that it must be urgently restructured if it is to survive. But another, less spoken of, crisis is brewing at SA’s municipalities. Municipalities account for about 45% of SA’s energy demand and they rely heavily on revenues they make by on-selling this electricity to customers. As such, they are as vulnerable as Eskom to a global phenomenon known as the utility death spiral in which electricity consumers defect from the power grid, lured by increasingly cost-effective alternative power sources causing the traditional utility business model to become increasingly unsustainable. But while local governments are well-aware that they too must transform if they are to survive, regulatory hurdles are preventing them from doing so. “It’s not just Eskom going through fundamental changes. It’s the whole energy industry — and it’s even worse at municipalities in terms of a decline in sales,” says Nhlanhla Ngidi, head ...
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