Western Cape Municipalities: Energy Infrastructure Plans for 2023/24

Meeting report

The Chairperson stated the purpose of the meeting, i.e. to discuss the projected energy plans of municipalities in respect of their 2023/24 infrastructure allocations.

Cape Winelands District Municipality Presentation  
Dr Elna von Schlicht, Executive Mayor, expressed her gratitude on behalf of the municipality for the money received from the provincial government to assist with the energy crisis in the Cape Winelands.

Mr Henry Prins, Municipal Manager, reported on the R950 000 grant that the municipality had received to augment electricity supply in the municipality. A tender was initially advertised on 5 May 2023 for the supply and delivery of two back-up mobile generators. Due to non-responsive bids, the tender was re-advertised on 14 July 2023. The bid evaluation process is scheduled to be concluded before 30 September 2023.

(See Presentation)

Discussion
Mr A van der Westhuizen (DA) sought assurance that enough back-up power would be supplied in Worcester and Stellenbosch to continue services during loadshedding. He enquired about the considerations for the specifications of the 100 KVA generators, whether it is big enough and if would be made available when municipalities within the district need it to pump water and treat sewage.

Ms N Nkondlo (ANC) asked what is meant by non-responsive bids and whether the issues related to the inability to secure bids had been resolved. She wanted to know if the roll-over application was related to the same project.

Mr C Dugmore (ANC) enquired about the running costs to operate the generators once it is procured and if a process was in place to determine the operational costs of the generators.

Mr P Marais (FF+) said the only way to store electricity is through batteries. He asked if a proper needs analysis had been done and whether the R950 000 would be sufficient or if a shortfall had been projected.

Dr von Schlicht confirmed that the municipality is able to provide sufficient electricity to continue services during loadshedding. The purpose of the mobile generators is to move the equipment wherever the need arises as part of the Disaster Management section. A needs analysis was done to provide capacity to local municipalities in need.

Mr Prins explained that the district municipality is not responsible for electricity provision. The procurement of mobile generators is a remedial action measure. The R950 000 grant would not be solving the energy problems within the district. The municipality has an existing capacity of 100 KVA on the asset register which proved to be working, hence the additional 100 KVA was considered to double the capacity for assisting local municipalities. Back-up power brings economic development to the municipality. The tender specifications were revised to rectify the technical matter that the bidders could not comply with. He said using the R950 000 for back-up power was a joint decision.

Mr G Brinkhuis (Al Jama-Ah) asked how many service providers the municipality had on its database and the period that the service providers had been registered with the municipality.

Mr Dugmore asked what percentage of municipal revenue is generated from sale of electricity in relation to the annual budget. He wanted to know if the NERSA-determined rate has been implemented by the municipality.

Mr Marais enquired about other sources to generate electricity in addition to the two generators and how much the municipality was able to feed into the grid. He asked if more generation capacity would be needed and whether the provincial government had been informed that more funds would be required. He wanted to know if consideration had been given to the energy crisis in view of the upcoming elections.

Dr von Schlicht said it was difficult to quantify the number of service providers. The municipality does not have the function to sell electricity and only provides for its own use and to add to local government capacity. The municipality is not affected by the NERSA rate. The needs analysis indicated that two generators would be sufficient at this stage. The five offices across the district have generators. The two additional generators will be used for back-up supply.

Mr Prins said the supplier database is a moving target. He undertook to submit the number of suppliers at a later stage. He stated that the municipality is not generating electricity and the NERSA rates do not apply. The municipality is able to carry on business during loadshedding but the challenges are with internet service providers because the towers become dysfunctional during longer periods of loadshedding.

Overberg District Municipality Presentation 
Mr Andries Franken, Executive Mayor, thanked the Western Cape government for the contribution to assist the Overberg communities. The generators would be used where it is needed for service delivery.

Mr Richard Bosman, Municipal Manager, stated that the business plan for the R1.6 million allocation was submitted on 3 March 2023. The plan includes the purchase of three mobile 100 KVA generators for emergency use within the district. As at 31 August 2023, two of the three generators as well custom built trailers would have been delivered. The trailer-mounted generators would be deployed to depots in Swellendam and Caledon.

(See Presentation)

Discussion
Mr Van der Westhuizen drew attention to a complaint from an official who installed generators. The generators are easily damaged because of the high demand and repairing the equipment is costly. He asked if the generators could be designed to be self-regulating to prevent overload and damage. He enquired about the relationship with the Waterboard and if the generators would be made available in terms of a rental agreement to the Waterboard and other entities when required. He asked if the back-up power supply by the municipality was not creating unfair competition to private service providers.

Mr Brinkhuis requested an indication of the number of service providers on the database of the municipality. He sought clarity on what is meant by an open tender.

Mr Marais asked if continuous diesel supply had been secured for the generators. He wanted to know if technical and maintenance support formed part of the procurement agreement. He enquired about the lead time on spares needed to fix generators.

Ms Nkondlo asked what the market cost is of a 100 KVA generator and the monthly diesel costs to operate the generator. She wanted to know if any of the generators are being used at the water treatment plants in the district.

Mr Franken replied that the district municipality does not have the function of bulk water supply but would assist the public in need. The municipality has a number of service providers but he was unable to provide exact numbers. The municipality relies on the depots of the Roads Department in the district for diesel supply. He confirmed that the plan for the generators includes repairs and maintenance but the availability of spares has always been a struggle. He replied to Ms Nkondlo that the costs depend on the use. The generators would be used at water treatment plants but it has not been allocated to a specific plant. It would be deployed where the capacity of a plant declines.

Mr Bosman, the Municipal Manager, said generators are self-regulatory and supposed to switch off when an overload is detected. The municipality has a good working relationship with the Waterboard and does assist in the event of an emergency while the Waterboard would pick up the operating costs. He replied to Mr Brinkhuis that an open tender means the advertisement of a valid tender. He undertook to do a snapshot of the supplier database and submit it to the Committee at a later stage.

Theewaterskloof (TWK) Municipality Presentation 
Mr Francois du Toit, Deputy Director: Electrical Sales, reported that the R1.8 million in grant funding was used to procure generators and vandal-proof cages for the generators. At the time of reporting, the installation of the generators would have been completed.

(See Presentation)

Discussion
Mr America noted that the transaction detail of only one of the 13 generators on the asset register was listed in the presentation. He asked if the details of the remaining 12 generators could be made available.

Mr Van der Westhuizen asked why the Lower Steenbras Reservoir pump station was listed on the TWK asset register when it is an asset of the City of Cape Town. He said items such as burglar bars to secure assets only serve as a deterrent for vandalism and delay the onset of theft. He asked if other additional measures are being employed to safeguard assets, e.g. to trigger an armed response when generators are tampered with or even when it fails to start when required.

Mr Marais observed a golden thread through all the presentations in terms of purchasing generators and supply of diesel. It seemed that each municipality had chosen different suppliers. He asked if all municipalities had been applying the same risk management protocol to ensure the availability of generators and if they had been consulting with each other to work together in terms of cooperative governance.

Mr Du Toit explained that only one order was issued and all generators were supplied by one contractor. He replied that the Lower Steenbras Reservoir pump station is situated in the TWK area and is an asset of the municipality. He stated that additional security measures include patrolling of the areas and the installation of alarms on the generators. The generators are insured for the first year of purchase to allow the municipality time to procure another maintenance contract. He agreed that municipalities should work together on contracts for maintenance and diesel supply.

Mr America enquired about the reason for not allocating asset numbers to all the assets listed in the presentation and if the assets are spread over a wide geographical area. He asked if the costs related to the safeguarding of generators formed part of the larger security contract of municipalities or if it is specific to the generators.

Mr Du Toit explained that the extract of the asset register in the presentation forms part of the last report. The allocation of asset numbers for insurance purposes would take place when the generators are handed over to the municipalities. He was unable to provide security cost figures but said it is included in other services for the municipality.

Overstrand Municipality Presentation 
Mr Stephen Muller, Director: Infrastructure and Planning, reported that the municipality had received an emergency loadshedding relief grant of R6.7 million from the Western Cape Government for the procurement and installation of additional back-up generators at critical water and wastewater facilities to mitigate the impact of loadshedding on the provision of basic services. Other electrical grant allocations had been received from the National Department of Mineral Resources and Energy. This includes R24 380 000 for the electrification of government subsidised housing projects (to date 1 307 units have been serviced in Gansbaai and Hermanus) and R4 200 000 for the replacement of old street light fittings with energy-efficient LED lights, estimated to replace 1 500 street lights. In 2016, the municipality initiated a small-scale embedded generation (SSEG) programme which allows SSEG customers to sell back to the municipality when they have surplus energy.

(See Presentation)

Discussion
Mr Van der Westhuizen sought confirmation that all generators installed in highly sensitive ecological areas have been equipped with oil traps to absorb diesel spills. He asked how the old technology compares with the more energy-efficient LED lights. He enquired about the low uptake of SSEG customers considering that Overstrand has a large amount of holiday homes. He asked how the current SSEG feed-in tariff of R1.04 compares to the ESKOM rate and why so many customers are choosing not to sell back to the municipality.

Mr Marais found the purchasing of generators at high costs intriguing. He enquired about the redundancy strategy for generators should ESKOM succeed in sorting out the energy crisis. He wanted to know if the municipality has an emergency plan in the event that something goes wrong with the generators.

Mr Muller replied that all generators have limited capacity to trap oil. He said the quality of lights is higher in LED lights. The municipality has been buying the LED lights from a reputable company for the past three years and to date, no replacements have been required. He explained that although hundreds of people register for the installation of embedded generators, only a few apply for the feedback tariff. This could be due to the administration involved compared to the possible income it might generate. The ESKOM rate varies depending on the time of day and the season. On average the municipality pays a rate of between R1.30 and R1.60 to ESKOM. He said there would always be a need for back-up generators. Historically, some generators had been installed at large critical infrastructure but with loadshedding, low-risk areas became high-risk areas and therefore the generators will never become redundant. Some of the pump stations are low risk and do not require back-up. The contractor provides diesel and security on sites as well as routine maintenance in terms of the purchase agreement.

Mr Van der Westhuizen asked what the cost of a smart meter is, should customers want to directly feed into the system. He wanted to know about the incentives for people to sell back to the municipality to lessen the pressure on the grid. He was aware of huge backlogs for bigger installations and enquired about backlogs for the inspection of systems in terms of SSEG customers who are able to generate electricity after the installation of the generators. He asked if the municipality was keeping up with the number of installations that require inspection.

Mr Marais said municipalities were planning around generators while households have been installing solar panels. He enquired about the waste management protocol for solar panels when it becomes redundant.

Mr Muller estimated the cost of a smart meter at approximately R10 000. He undertook to consult with Waste Management Services about solar panel waste. All waste is separated at a sorting facility and sold off. Waste classified as hazardous is sent to the Vissershok facility in Cape Town.

Cape Agulhas Municipality Presentation 
Mr Raymond Ross, Deputy Mayor, expressed his gratitude on behalf of the municipality for the grant allocated by the Western Cape Government.

Mr Stephen Cooper, Manager: Electro-Technical Services, said the municipality had a rude awakening during the peak holiday season in December 2020 when loadshedding increased drastically to level six. Emergency interventions had to be implemented to mitigate the impact of loadshedding on service delivery in the coastal towns. R3 million had been allocated by the Local Government during the adjustment budget cycle to procure generators to replace the costly rental fleet. The municipality received R350 000 from the province as a contribution towards the purchase of one generator. R11 million was received from the Department of Mineral Resources and Energy to enable the replacement of street lights with LED-type lights as specified in the Energy Management Policy of the municipality. The municipality managed to mitigate the risk of loadshedding in the 2022/23 holiday season as a result of the installation of the generator fleet and rental of units at all essential water and sewer installations.

(See Presentation)

Discussion
Mr America asked for more context on the DBSA loan should the funding be granted for the alternative and renewable energy project. He asked if the potential costs for the transaction advisor are included in the DBSA loan amount and what process was followed to identify the transaction advisor.

Mr Marais asked if the municipality had an awareness campaign to inform people of the need to reduce energy waste. He enquired about regulations and oversight protocols to protect underground water considering that the Western Cape is a drought-stricken province.

Mr Van der Westhuizen said it is good practice to allow boreholes to rest. He asked if it was possible to not operate generators for 24 hours a day during loadshedding. He drew attention to the high tariffs that were charged for excessive consumption during the Day Zero campaign. He asked if the municipality was using a sliding scale to encourage consumers to use electricity sparingly. The costs incurred to maintain the grid even during months when no income is generated from electricity sales, have to be recovered. He wanted to know to what extent tariffs are being used to raise awareness amongst customers. He sought clarity on where the responsibility of the municipality starts and that of ESKOM ends in terms of supplying energy to holiday towns.

Mr Eben Phillips, Municipal Manager, replied that awareness drives had been employed because the municipality needed the support of the public to understand the challenges. Consumers now understand their role in reducing energy consumption. For the past two years, the budget had to be adjusted to secure energy for the provision of basic services. The municipality embarked on an extensive educational drive on the impact of loadshedding on households, businesses, and the municipality. The municipality is vulnerable during drought periods and must provide for periods of lesser rainfall. The increase in the population size was adding to the challenges of providing water and electricity. The municipality employs targeted interventions for holidaymakers by making them alert of the restrictions in place.

Mr Cooper replied that the DBSA funding is not a loan but it will form part of the final tender of the PPP project. The funding will not impact the municipality. National Treasury has appointed a project manager to assist the municipality. The period of the advisory panel will last until the financial close of the project. He replied to Mr Van der Westhuizen that the borehole pumps are not being abused but it is used more during the holiday season. He confirmed that a sliding-scale tariff is in place for water consumption. The costs of maintaining the network are recovered during the December holiday period. Most holiday towns are supplied with electricity by the municipality while ESKOM is supplying electricity to certain parts of holiday towns.

Mr America asked if the transaction advisor was an official from National Treasury or from an external company.

Mr Cooper replied that the consultant was appointed by SALGA to assist the municipality. The R23.1 million funding for the transaction advisor covers a period of five years until the financial close of the project. He explained that the advisor is not a single person but a panel of six to nine professionals specialising in different fields. Due to the difficulty in attracting an advisor, the municipality had engaged the province to take over the process of appointing an advisor and possibly save money.

Swellendam Municipality Presentation 
Mr Willem Treurnicht, Senior Manager: Infrastructure, apologised for the absence of the Executive Mayor who was tied up with crowds who had embarked on violent protests in Swellendam. The municipality received R1.3 million from the Western Cape Government for the purchase of a stand-by generator. But in terms of the needs analysis, further funding was needed for a bigger generator to carry the Waste Water Treatment Works (WWTW) in Swellendam. A renewable energy project will provide protection for the WWTW in Swellendam to be connected to the electricity feeder in the industrial area.

(See Presentation)

Discussion
Mr Marais was interested in how the Committee could help the municipality take care of its challenges.

Mr Van der Westhuizen was impressed by the long-term views of the municipality. He noted that the Demand Management System became a high priority for Swellendam and was concerned that being so close to the national demand could endanger tourism and result in loss of employment. Municipalities are experiencing a rise in the peak after loadshedding ends because the inverters, that people have invested in, are reloaded from the grid. He asked for feedback on managing demand, e.g. switching off hot water cylinders and battery back-up systems. He noted that the presentation was silent on Barrydale and was interested to know how the back-up systems there are being managed. The huge investment that the municipality needs might become obsolete in a few years and it might not be worthwhile to invest in infrastructure that might become redundant.

Mr Pretorius drew attention to the huge losses suffered by fruit farmers in Barrydale due to irregularities in the irrigation systems. He asked if the municipality is equipped to assist the holiday areas such as Witsand and Malgas in time of need.

Mr America said the Swellendam Basin is a large exporter of agricultural products. Considering that the Breederiver runs through the area, he asked if the municipality had considered hydrogen generation to augment the capacity in the region.

Mr Treurnicht said investment in the energy system in Swellendam is needed in addition to the capacity from ESKOM. The municipality needs to supply energy without investment from ESKOM to sustain growth in the area. The scale of private investment in renewables to mitigate loadshedding is starting to have a negative impact on the Demand Management System. The back-up systems installed by residents are working against the purpose of loadshedding. To limit the peak after loadshedding, the municipality has started implementing limitations to recharge batteries. Other possible solutions to manage the load include exercising geyser control and the introduction of smart meters to reduce the trip current. These interventions require larger investments to gain control of the demand. He stated that the municipality is able to manage loadshedding up to stage four in Barrydale. ESKOM will not solve loadshedding in the foreseeable future therefore a large capital investment in infrastructure is needed. He disagreed that the infrastructure would become redundant because in the future there would always be a need to augment demand. The municipality will need ESKOM to upgrade and increase capacity from transmission lines for the management of the irrigation system in Buffelsjag. The municipality only provides wastewater services but not electricity and water services in areas such as Malgas and Witsand. The feasibility of hydro options is being investigated in cooperation with the City of Cape Town.

Mr Marais said there are too many role players involved. He wanted to know which role player, from ESKOM to the provincial government was causing the most problems. He asked if the quality of underground water flow is affected by the informal settlements in the area and if regulations are impeding the work of municipalities to act on this matter. He wanted to know if municipalities are advocating to become less dependent on ESKOM in terms of the devolution of power process.

Mr Van der Westhuizen argued that Swellendam qualifies as a site for the installation of the battery energy storage system (BESS) which ESKOM has been promoting in other areas. He wanted to know if the municipality has been discussing the possibility with ESKOM or if it plans to be the funder of its own system. He asked if the return on investment for managing demand had been calculated and if the investment would be saving residents some money. He wanted to know if the investment would be less than the benefits through demand management.

Mr Treurnicht replied to Mr Marais about the regulations as stumbling blocks starting with the MMFA which does not allow the municipality to sign long-term contracts with service providers. This prohibits the municipality from procuring a substantial energy system in terms of a 15 to 20-year contract. The municipality has teams monitoring the informal settlement areas to prevent pollution and to date no problems have been reported. Plans are in place to install extra toilets. He replied to Mr Van der Westhuizen that the need to invest is part of economic growth and to have sustainable growth requires of the municipality to meet the energy demand. Renewables are not regarded as the sole energy source but is part of the solution. He acknowledged that managing all role players is a challenge. The municipality had been in discussion with ESKOM about the installation of the BESS in Montague and had requested ESKOM to consider moving a part of the system to Swellendam where there are network limitations. But in the last meeting, ESKOM was silent on the matter. The return on investment is still being calculated as part of a bigger project to determine if it makes economic sense.
 
Actions and resolutions
Mr Marais noted that each municipality has its own plans and proposed that the Committee consider the need for a united approach to renewal energy and its application. A joint practice approach has not been adopted for solar panel waste when in the future ESKOM is back online and generators become redundant. He was concerned that the solar panels would end up in scrap yards.

Mr van der Westhuizen said capital investment in emergency power supply might be excessive but it is required to have a back-up system to avert a bigger crisis. He disagreed that the generators would become obsolete because it is more like an insurance policy and an investment in the environment. He proposed that when the Minister of Energy addresses the Committee, he should be questioned on the fairness of ESKOM levying penalties on customers for exceeding the maximum energy use for the period after loadshedding. It was unfair that customers, who do not have the capacity to manage the system, are penalised when it is ESKOM’s responsibility. He proposed that the Committee investigate the possibility of the province assisting municipalities in managing demand. He enquired whether the municipality was able to keep up with the settlement of outstanding ESKOM accounts. Many municipalities ignored the statements from ESKOM without any consequences which is affecting those municipalities that do pay but still experience loadshedding.

Mr Pretorius drew attention to the recent statement of the R5 billion loss in the first three months reported by ESKOM. He asked how prepared municipalities are for the eventuality that the situation might get worse and that ESKOM will in the future not be able to supply electricity. Given the decline in electricity income for most municipalities, he proposed the establishment of a new municipal financing model. He was aware of the efforts by the province to become ESKOM-free and asked whether the projected costs thereof to poorer municipalities in the Western Cape had been considered.

Ms D Baartman (DA) held the view that every resident must be empowered to make informed decisions about becoming energy generators. Therefore, she proposed that the Committee invite the relevant role players for engagement. Firstly, National Treasury and SARS on the tax incentives for installing renewable energy solutions. Some business incentives are in place but it is not the same for households who plan to become energy generators. Secondly, National Treasury along with the Banking Association of South Africa to share the financial incentives for residents in terms of installing renewable energy solutions. People need assistance to become energy secure and economic role players in energy supply. Lastly, National Treasury and umbrella insurance companies for an understanding of the insurance options available to residents and businesses.

Mr Dugmore raised a procedural point about dealing with resolutions and said it was not the same as formal motions in the House. He proposed that the Committee request further information from Category B municipalities in terms of the breakdown of electricity sales contribution to the annual budget. He agreed that purchasing generators is not wasteful because provision has to be made for emergency circumstances. He asked that Category B municipalities indicate whether they are complying with the NERSA tariff. He reminded Members of the agreement on the previous day to invite the Mayor of Cape Town and the Comparison Energy Initiative in Mandela Bay for a presentation.

Mr America said the concerning aspect emanating from the presentations was the financial pressure on municipalities to provide electricity. He suggested that the Committee express concern about the discrepancy between the NERSA tariff and the ESKOM rate with regard to the cost of delivery electricity and the pressure it places on municipalities.

The Chairperson sought clarity from Mr Dugmore about the request for a presentation by the Mayor of Cape Town.

Mr Dugmore replied that the Committee heard evidence that the City of Cape Town refused to apply the NERSA rate but a higher rate is being charged to consumers. He needed to understand the motivation for the additional tariff being charged by the City of Cape Town and proposed that the Mayor should explain the position regarding the NERSA tariff.

Mr America replied that the situation was not unique to Cape Town. He suggested that the best option would be to invite NERSA to explain the discrepancy regarding the imposition of tariff increases.

Mr Dugmore proposed that both NERSA and the Mayor be invited to discuss the tariff increases.

The Chairperson thanked the sign language interpreter and her colleagues for their services until the end of the meeting. The next meeting is scheduled for 13 September 2023 with the Central Karoo municipalities.

The meeting was adjourned.