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News24
3 days ago
- Business
- News24
City Power: Eskom dispute ends, but now deeper cracks show
A high-stakes power play between Johannesburg's electricity distributor, City Power, and Eskom Distribution has reached a fragile settlement, ending a four-year, R4.9 billion dispute that has laid bare critical failings in South Africa's electricity distribution industry, writes Chris Yelland. At the centre of the dispute was City Power's claim that Eskom had significantly overbilled it for bulk electricity supplied between July 2020 and September 2024. The dispute, which escalated into a protracted financial and technical stand-off, led to an independent investigation and report by the South African National Energy Development Institute (SANEDI) ordered by Energy & Electricity Minister Kgosientsho Ramokgopa. City Power accused Eskom of overbilling amounting to R4.47 billion for electricity supplied at multiple intake points. Further claims included R323m in alleged overcharges where Eskom estimations were said to have failed to factor in the effects of load shedding, and another R91m as a result of incorrect estimations for electricity supplied at intake points that lacked operational metering infrastructure. Eskom rejected the allegations and insisted that 42 of the 49 intake points in Johannesburg were billed based on actual meter readings. Eskom further maintained that estimates were used only where vandalism or theft had compromised metering systems, and accused City Power of relying on incorrectly configured or missing check metering systems, and City Power's seriously flawed 'mock billing' practices. The SANEDI report, finalised in January 2025 and now in the public domain courtesy of the Organisation Undoing Tax Abuse (OUTA) following an application in terms of the Promotion of Access to Information Act (PAIA), delivered a damning analysis, particularly in respect of City Power's main claim, but also in respect of Eskom's estimating practices. The findings The SANEDI report supported Eskom's assertions that City Power's own check metering and mock billing practices were marred by inconsistent meter configurations, incorrect meter placements, and gaps in data management – thus undermining the credibility and validity of the major portion of City Power's claims. While Eskom's meters and associated billing were found to be generally accurate, SANEDI concluded that where estimations were unavoidable, Eskom relied upon its own internal estimating practices, rather than those of National Rationalised Specification (NRS) standards, which are jointly prepared and agreed to by both Eskom and municipal electricity distributors. Importantly, when applying NRS 047-compliant estimation methods, SANEDI found that City Power had in fact been underbilled by Eskom by about 412 GWh across the six largest metered intake sites. This finding completely undermined and refuted a major portion of City Power's claim against Eskom. But the investigation also found that Eskom's internal processes of metering estimates fell short of the requirements of NRS standards and the Distribution Metering Code, which require consultation by Eskom with the customer (City Power) during the estimation processes. The impact of load shedding was found to be another blind spot in Eskom's estimating model. The recommendations The SANEDI report has called for significant reforms. City Power was advised to upgrade its check metering infrastructure and ensure alignment with the Distribution Metering Code. Eskom, in turn, was urged to revise its estimation protocols in line with electricity distribution industry standards, and to improve the transparency and timelines of its processes for Notified Maximum Demand applications. SANEDI further required that adjustments be made by Eskom to account for average load reductions of 2.74% in 2022 and 10.85% in 2023 during the hours of load shedding, based on analysis across affected substations. These adjustments, the report argued, should be standardised and factored into estimating methodologies during future load shedding periods. Perhaps most significantly, SANEDI called on the National Energy Regulator of South Africa (NERSA) to update metering standards and estimating procedures to reflect the realities of load shedding, and to ensure transparency, consultation and firm timelines by electricity distributors when estimating metering data at large supply points, and in applications for increases in notified maximum demand. The settlement After the finalisation of the SANEDI report, the parties reached a financial settlement of the dispute. City Power agreed to keep its current account up to date and to settle its R3.2 billion bulk supply arrears with Eskom over the next four years. On its part, Eskom agreed to waive R830m in claims for exceedances of notified maximum demand, interest and penalties. Eskom has also indicated its willingness to assist City Power with extended payment terms for the months of June, July and August when high winter electricity prices are in effect. Sources also suggest that the settlement included rectification of metering infrastructure at key substations, and a new protocol for data sharing and dispute resolution. Though the deal has been publicly framed as a success, the underlying issues remain far from resolved. Many municipalities have reached settlement agreements with Eskom Distribution, and several have promptly defaulted again within months. It remains to be seen whether the City Power and the City of Johannesburg is financially sustainable and able to meet its settlement commitments while keeping its current account with Eskom up to date. The implications The implications of this saga stretch well beyond Johannesburg and City Power. Across South Africa, municipalities owe Eskom more than R100 billion – much of it clouded in similar disputes over metering integrity, billing transparency and infrastructure decay. This dispute has exposed a critical need for independent oversight of Eskom and municipal billing processes, and has prompted calls for a nationwide audit of distribution and metering systems. Perhaps the most important lesson is the urgent need for a functional, standardised and enforceable framework governing the relationship between Eskom and its municipal distributors. Without this, South Africa risks deepening the cycle of financial instability, technical dysfunction and public distrust that has long plagued its electricity distribution network. Conclusion While this metering and billing dispute is now resolved, the technical and institutional weaknesses remain. The settlement may have kept the lights in Johannesburg on – but the real work of modernising Eskom and municipal electricity metering and billing systems has only just begun. For now, the City Power – Eskom saga has ended with somewhat frosty handshakes and gritted teeth behind forced smiles. But unless systemic reforms are enacted, similar disputes may soon flare up in Tshwane, Ekurhuleni, eThekwini, Mangaung, Nelson Mandela Bay and beyond – each one delivering another blow to an already fragile electricity distribution industry.
The Citizen
30-06-2025
- Business
- The Citizen
WATCH: City Power to pay Eskom R3.2b settlement
Provided an update during a briefing on June 24 at the Hugh Masekela Boardroom in the Johannesburg Theatre. City Power and Eskom reached the R3.2b settlement after both parties avoided a protracted court case regarding electricity billing and debt dispute resolution. The settlement amount will be paid over four years. The Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa, and the executive mayor of the City of Johannesburg, Dada Morero, provided an update during a briefing on June 24 at the Hugh Masekela Boardroom in the Johannesburg Theatre. This agreement follows a notice issued by Eskom in November 2024, threatening to cut the power supply to Johannesburg. In November, the minister and the mayor led a high-level engagement to mediate among all parties, which initiated a collectively agreed-upon technical intervention by the South African National Energy Development Institute (SANEDI) to investigate and assess discrepancies in the dispute. Ramokgopa was pleased that the dispute, dating back as far as 10 years, was finally resolved. He said they needed a technically competent and neutral party to help them resolve the conflict. 'SANEDI could discharge and carry out that responsibility with the utmost distinction. 'We are going to make the SANEDI report public and have committed, together with the mayor, to satisfying our constitutional responsibilities of ensuring that we surface all the facts and share all the information so that those who want to familiarise themselves with the technical aspects of what we found can do so,' he said. He said that when they began the process in November, they anticipated it would take three weeks. However, several months later, the report has only now been released. 'SANEDI's investigation was somewhat narrow, focusing solely on the issues before us – namely billing and metering. That exercise was completed, but during the process, the parties felt the need to mine more raw data to ensure proper reconciliation. You can imagine the volume of data, which is why we needed the extension,' he said. The minister noted that they had learned the value of intergovernmental relations. He emphasised that the courts should be a last resort and should not be burdened with matters that can be resolved between the parties. He added that another key lesson came from the scale of the exercise at City Power in Johannesburg, noting that no other municipality or city in the country is larger than Johannesburg. 'If you can resolve the challenges with City Power, you should be able to resolve challenges across the country.' He noted that while the challenges may not be identical, their complexity and magnitude are significant, and there is now almost a template for how to address similar disputes in the future. 'We also learned that leadership is key. Mature heads and cool minds entered this conversation with the sole intention of resolving the dispute. 'We confirmed the issues related to the impact of load-shedding. When metering was absent, we relied on estimates that were not accurate. One lesson learned for the future is to ensure that bulk metering is in place—and that during load-shedding, it must register zero, as there is no bulk supply of electricity,' he said. Morero thanked the minister for his effort and the work that was done. 'We are happy with the settlement, as outlined. Now it is a matter of implementing the agreement reached. Thank you to the teams who worked so hard to arrive at this settlement,' he said. Other stakeholders present included City Power CEO Tshifularo Mashava, acting city manager Tshepo Makola, Eskom group executive Monde Bala, SANEDI CEO Dr Titus Mathe, and chairperson of the board Sicelo Xulu. At Caxton, we employ humans to generate daily fresh news, not AI intervention. Happy reading!
