Interesting read on Fin24 - What City Power hasnt told you... CITY Power Johannesburg is treading a tightrope that is fraying at the edges. And the net is long gone, possibly removed by saboteurs. Or it simply hasn’t been replaced for years. The company’s annual reports and the latest quarterly report released in June for the period January to March 2013 contain some shocking information. First some background. City Power was established in 2001 as an independent municipal entity, wholly owned by the City of Johannesburg. The National Energy Regulator of South Africa granted City Power a licence to trade on December 19 2001. Today City Power has about 400 000 customers, ranging from domestic to commercial and industrial properties. This covers most of Johannesburg, with Eskom providing electricity to only some sections of the city, primarily Soweto and Sandton. City Power made a profit in the past financial year, but its statements were qualified. Now – some things you probably haven’t heard about. 1. The wage bill Citypower has 1 610 employees in service. The budgeted wage bill for 2013 is R773m. That means the average salary per Citypower employee is R40 000 per month – give or take a few rand. This amount includes overtime and was probably the reason why City Power was so intent on implementing a new shift system for employees: to curb overtime spend. This new shift system idea led to last weeks blackouts, when employees went on strike and the city was then hit by power outages that continued for days. The blackouts have been estimated to cost the city R100m in revenue per day. At the moment there are ongoing investigations around the cause, with some believing the outages were the work of saboteurs. 2. Electricity theft Nearly a quarter of all the electricity City Power buys from Eskom is lost to non-technical losses, a pretty synonym for electricity theft. This is electricity City Power has already paid Eskom for. The total estimated cost of these losses for the year to date is R1.4bn. 3. Bad debts and debtors On March 31 2013 Citypower had a debtors book of R4.9bn. The amount of debt older than 90 days was R2.7bn. In a report City Power officials presented to the city council, it says it plans to write off around R1bn of this debt this year. 4. Maintenance and network Consider that the wage bill for City Power is in excess of R700m. The approved City Power capital budget (money spent on the actual network) for the 2012/13 financial year is R1.097bn. However, when one looks at that number a bit deeper the following jumps out: R175m will be spent on upgrading the electricity network. R540m will go towards rolling out prepaid meters. R64m will be spent on bulk infrastructure, like transformers. The entity says there is a risk of overspending on repairs and maintenance due to insufficient budget allocation. “The budget is currently 3% of total revenue generated through the sale of electricity, but it should ideally be 5%.” Is City Power spending enough on its network? I don’t know. But consider that the entity struggled for days last week to bring power back on line after the employees strike. Why was that? How difficult can it be to reset circuit breakers? Some context and solutions Electricity is a political and social hot potato, and the decision to switch off the lights of people who are not paying their power bills is often an impossibly difficult one. However, many of the big debtors are not poor, private households but often other government entities based in the city area. It’s unacceptable for these clients not to pay their bills. The same goes for big business. Government must act on these non-payments. The amount of electricity lost – a quarter in total – is a disgrace. Where are the arrests? Spending on maintenance and upgrading of networks may be limited to budget, and budget is limited to the money collected from the tax base. The tax base is in deep trouble, given economic conditions and high unemployment rates in the country as well as in Johannesburg. However, does it make sense that the average City Power employee gets paid R40 000 per month? That number seems illogical. Also, if sky high debtor levels are better managed, there may be more money for the network. The City of Johannesburg also has other utilities like waste management company Pikitup, where similar tough issues could be raised around the management and cost structure. Are these entities being monitored closely enough? These issues bear consideration because at the end of the day, what’s a world class city without electricity? Just a place you might have come from, never a place you’re going to. - Fin24 *Follow James-Brent Styan on Twitter at @jamesstyan. Views expressed are his own.
Posted on: Sun, 29 Jun 2014 19:41:36 +0000
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