During a recent joint meeting of the portfolio committees on electricity and energy and cooperative governance and traditional affairs, it became clear there is some sympathy for Eskom when it comes to the issues of nonpayment by municipalities.

The problem is large, with Eskom confirming that the backlog now stands at more than R114-billion, while warning that it could exceed R300-billion by 2030 if left unchecked and will threaten its financial turnaround.

Those committee members who naturally still mistrust the State-owned utility owing to its myriad of past governance and operational failings, and who often express hostility towards the executives appearing before it, chose instead to direct their ire towards those representing local government.

There was, thus, not much real debate on Eskom and government’s current preferred instrument for dealing with the problem: Distribution Agency Agreements (DAAs).

Through DAAs, a municipality’s electricity business is fully ring-fenced, and billing and revenue collection are conducted by Eskom for five years. The idea is to ensure that Eskom’s current account is kept up to date, while injecting skills and resources to improve revenue collection and network operation.

The intervention has already been implemented with mixed success in three cases, including in Maluti-a-Phofung and Emfuleni following court rulings, and in Merafong, where implementation is being legally contested.

However, Eskom and the National Treasury are pursuing broader implementation in response to the underperformance of the 2023 Municipal Debt Relief Programme, whereby municipalities that owed a collective R58.5-billion became eligible to have their historical debt written off in tranches over three years. Those municipalities now owe Eskom over R94-billion.

To do so, they had to consistently meet various conditions, the most important being that of ensuring that their current accounts with Eskom were kept up to date. Some 71 municipalities were approved for participation, but the National Treasury reports a compliance level of only 66%.

It has, thus, written termination letters to 13 municipalities and is preparing 14 more. These letters give affected municipalities the option to remain part of the debt-relief programme only if they enter into five-year DAAs with Eskom.

Eskom confirmed that ten municipalities had council resolutions to initiate the process, while the National Treasury confirmed that these councils had until September to follow the processes outlined in Section 78 of the Municipal Systems Act to facilitate the transfer to Eskom.

Given the scale of the problem and the visible lack of performance of many councils, parliamentarians were not especially receptive to appeals that the DAAs be used sparingly. There was even less openness to the warnings about the one-sided nature of the DAAs that have been implemented and the potential for unintended financial and operational consequences.

There was absolutely no debate, meanwhile, on how these DAAs aligned with the reforms under way in the electricity supply industry and their impact on the sustainability of the distribution sector, which is now the biggest threat to both security of supply and the shift to a competitive market.