South Africa’s power utility, Eskom, has reached principle agreements with the following three indebted municipalities in the Mpumalanga Province, namely Chief Albert Luthuli, Mkhondo and Thaba Chweu.

The state-owned power company has been engaging with several Mpumalanga municipalities over the past few weeks who have been defaulting on their electricity payments.

Eskom clamps down on defaulting munis

The utility stressed in a company statement that they will continue to engage the remaining four local municipalities namely, Goven Mbeki, Lekwa, Emakhazeni and Nkomazi adding that they are confident that they will reach reasonable repayment agreements.

[quote]The parastatal has threatened to go ahead with the disconnection process should the questioned municipalities not come to a workable solution this week.

Eskom is also finalising discussions with eMalahleni Local Municipality, stating that they remain positive that an agreement will be concluded very soon.

Decision to disconnect defaulting munis

In April last year, Eskom said that as of 31 March 2015, the total municipal arrear debt greater than 30 days was ZAR4.6 billion ($340 million).

Of this amount, the top 20 defaulting municipalities at that time were indebted to Eskom to the amount of ZAR3.68 billion ($272 million) for the bulk supply of electricity.

With necessary action needed to be taken to recoup these funds, the then interim Chief Executive of Eskom, Zethembe Khoza, said at the time: “We have therefore decided to exercise our right according to the provisions of the Electricity Regulation Act 4 of 2006 and the supply agreement with municipalities, which entitled us to disconnect the supply of electricity to defaulting municipalities.”

Recouping costs

Last week, the utility announced the rollout of prepaid meter installations in Sandton, Midrand and Soweto as well as Kagiso, with the objective being to enhance revenue to support the company’s financial sustainability efforts.

Plans for Johannesburg’s large urban settlement, Soweto, which has an estimated 180,000 customers, of which 80% are connected to a conventional billed metering system, include converting all users to split prepaid meters within the next 5 years.

The emphasis has been placed on this community due to facts indicating that Soweto residents were indebted to the utility by an estimated ZAR8 billion ($526 million) – stats taken in May 2015.