Co-operative Governance and Traditional Affairs (Cogta) Minister Velenkosini Hlabisa said his department was toying with the idea of introducing a surcharge in all municipalities for residents who use rooftop solar systems in areas that receive municipal-supplied electricity.

This comes after the eThekwini Municipality proposed a similar electricity reform strategy in October to deal with its declining revenue by charging separately for energy consumption and for infrastructure.

At the time, The Mercury reported that Ish Prahladh of the eThekwini Ratepayers and Residents Association said they would challenge the proposal as the City has struggled to provide electricity for years and consumers have turned to alternative sources of energy.

Hlabisa said his department is initiating several strategies to mitigate revenue loss due to municipal customers’ shifting towards off-grid and embedded generation solutions, including residents having to pay a surcharge on their systems to help improve municipal revenue generation.

The latest developments come amidst the ongoing National Energy Regulator of SA (Nersa) public hearings, with Eskom asking for a 36.15% tariff hike for the 2025/26 financial year, followed by 11.81% and 9.10% for the following two years.

At least 75 municipalities owe Eskom more than R92 billion in unpaid electricity bills, with the power utility saying this could have an impact on the progress it has made in maintenance and power supply stability.

ANC MP Nombiselo Sompa-Masiu asked Hlabisa in a parliamentary question how his department intends to mitigate municipal revenue loss due to some households generating their own electricity.

In his response, Hlabisa said his department acknowledges the impact of off-grid generation on municipal revenue.

He said to address this, the department is developing strategies to diversify and enhance municipal revenue streams.

Hlabisa said short-term interventions include exploring alternative revenue streams and reviewing tariffs to ensure they remain competitive, improve revenue collection and reduce debt.

He said municipalities will, through Nersa regulations, impose a surcharge on all scaled-embedded electricity systems to improve revenue generation.

“The department, through the office of the Results Management Office (RMO), also supports municipalities in developing their Small-Scale Embedded Generation (SSEG) policies and guidelines,” he said.

“In this regard, we will work with Sustainable Energy Africa to design suitable tariffs for all SSEGs and those IPPs (Independent Power Producers) seeking to wheel power through the municipal network. This will go a long way to improving municipal revenues.”

He said the department would also support municipalities in exploring alternative revenue streams, such as waste management, water services, and property rates.

“We are considering collaboratively investing in smart grid infrastructure and supporting research into new energy technologies and innovative revenue models.

“Our department will continue to work with the National Energy Regulator (Nersa) to ensure regulatory frameworks support municipal energy generation and distribution,” Hlabisa said.

Energy expert Professor Wikus van Niekerk, the Dean of Engineering at Stellenbosch University, said a surcharge on rooftop solar and other forms of alternative energy will “accelerate the death spiral of both Eskom as well as the municipalities”.

“Paying customers who can afford to actually now install more Solar PV will then completely disconnect from the municipal grid, so they don’t pay anything.

“Of course, the next step after that is to tax these people more, because they now have to pay for these floundering business units that we have within the municipalities.”

Van Niekerk said government departments, municipalities and the Metros must pay their Eskom accounts as these are “the real things that will make a difference, but are ignored”.

Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse (OUTA) described the issue of a surcharge as a “self-inflicted pain that Eskom has thrust upon municipalities because of the load shedding debacle”.

“There are many homes that use gas as an alternative supply and we think that there's going to be a potential legal challenge, because you cannot treat this in one way for certain users of alternative energy, and not for others.

“Are they going to now start considering charging people who have wind power options on their homes and

factories? So we think this is a problem and it will be challenged,” Duvenage said.

He said municipalities also need to manage their finances better instead of just focusing on continuously taxing people.

“When Eskom ramps up its costs over 500% in the last 12 to 15 years, obviously people are going to switch off, reduce their consumption and look for alternatives.”

He said anyone building a house, shopping complex, an estate or large construction system is going to go off grid as much as possible.

“That is largely as a result of Eskom’s doing, not theirs, and I think it is going to push them completely off the grid, where they cannot be charged an additional cent and that’s going to make matters worse for Eskom.”

THE MERCURY