Dear Eskom, don’t load shed Western Cape municipalities with paid-up accounts!

18 September 2022

Eskom’s almost incalculable financial problems demand that the utility should collect debtors’ accounts promptly on all of its reduced output. Instead of providing reduced output across its entire market, including non-paying and delinquent customers, Eskom should sell all of its reduced output to customers with the best, and soonest, payment record.

When failing generation produces inadequate capacity for the market, output should be sold where payment is guaranteed, and not wasted on customers with arrears accounts and bad payment records. In short: if a business fails to produce at full capacity to satisfy its market, also because customers do not pay promptly, available output should be sold to paying customers to mitigate loss.

I have written Eskom Group Chief Executive André de Ruyter on September 13, to propose that Eskom load sheds only arrear municipalities, and protects its revenue streams in paid-up municipalities. I suggest that it is imprudent, and unsound business practice to deliver product to delinquent consumers at the expense of delivery to paying consumers.

Eskom forfeits revenue of some R21-million per day per stage of load shedding. Although electricity demand is relatively low on Sundays, stage 6 on Sunday, 18 September, potentially cost Eskom R126-million! Good business practice compels the utility to maintain its delivery where its revenue is most stable – in municipalities where the Eskom account is current – in order to maximise sales, and revenue. With some R400-billion debt Eskom cannot afford revenue losses in addition to the cost of load shedding.

Eskom should sell as much as it possibly can where it is paid best. And Eskom should not distribute to customers where it will probably not recover on debtors; where recovery is known to be unreliable, or even absent. Eskom cannot possibly survive when customers do not pay for its product… no business can survive such delinquency.

Majority party governed municipalities in the Western Cape make for reliable Eskom revenue streams and deserve Eskom’s best practices. Even in coalition, and even where coalitions demand full-time political management for survival, majority governed Western Cape municipalities service Eskom accounts, and manage Eskom accounts better than other governments! Majority party governed Western Cape municipalities prioritise Eskom accounts. Majority party governed Western Cape municipalities are Eskom’s lowest risk customers. Majority party governed Western Cape municipalities prioritise Eskom payments, because the Eskom product earns critical municipal revenue. Eskom should not load shed paid-up Western Cape municipalities. It is good practice, for Eskom, and the practice will reward good governance for the deserved benefit of Western Cape voters who have entrusted the management of their public affairs to able elected and appointed stewards.

I propose that this revised policy may also greatly incentivise defaulting municipalities to bring their accounts up to date. I suspect that ratepayer and resident demand for Eskom accounts to be brought up to date in order to eliminate load shedding may impel defaulting local governments to settle their arrears. Surely immediate collection on full output will empower Eskom’s generation capacity sufficiently to roll out additional uninterrupted distribution in target municipalities as the accounts are settled, and provide for improved generation by sooner and better facility maintenance.

I trust that the chief executive and I can pursue this strategy forthwith, for the benefit of paying customers and Eskom alike.

By Tertuis Simmers, DA Western Cape Leader & Provincial Minister for Infrastructure