VZCZCXYZ0001
RR RUEHWEB

DE RUEHSA #1684 1301004
ZNR UUUUU ZZH
R 101004Z MAY 07
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 9716
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS PRETORIA 001684 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
DOE FOR GPERSON, CGAY, TSPERL 
 
E.O. 12958: N/A 
TAGS: ENRG SF
SUBJECT: SOUTH AFRICA MUNICIPAL ELECTRICITY DISTRIBUTORS IN 
POOR SHAPE SAYS ENERGY REGULATOR 
 
REF: PRETORIA 00373 
 
¶1. (SBU) Summary.  The National Energy Regulator of South 
Africa (NERSA) found in a technical audit that municipal 
electricity distributors have under-funded infrastructure 
development, lack skilled staff and can not deliver the 
quality of supply required of them.  The audit found that 
electricity infrastructures of smaller municipalities are 
generally in a poor state of repair.  Larger municipalities 
and non-municipal distributors fared better in the audit. 
The electricity distributors would need to spend R422 million 
($61 million) million per year to maintain service levels and 
spend an additional $431 million ($62 million) to remove 
infrastructure backlogs that have caused costly, numerous and 
severe power outages throughout the country.  End Summary. 
 
2, (SBU) In the wake of power outages in 2005, NERSA ordered 
an external technical audit of the country's eleven largest 
electricity distributors.  Nine of the eleven distributors 
were municipalities which buy electricity wholesale and 
resell it through distribution networks which they own and 
operate.  The remaining two distributors are operated by 
Eskom, South Africa's parastatal electricity provider. 
Approximately 95% of the country's electricity is generated 
by Eskom which sells electricity to the municipalities. 
(Note: Audit objectives were to assess the condition of 
network substations, and to determine the effectiveness of 
maintenance, refurbishment, expansion and operations.  The 
audit report was given to NERSA management in May 2006 but 
was not publicly released by NERSA until May 2007.  End 
Note.) 
 
¶3. (SBU) Eskom's Southern and Northwest regions received high 
marks in the audit for management, maintenance, 
refurbishment, staffing and technical expertise.  Larger 
municipal networks such as Pretoria, Cape Town and Durban 
were found to be well-designed and installed but suffering 
from lack of investment and the loss of skilled staff.  The 
audit found that smaller municipalities are heavily 
under-resourced, lack technical and maintenance management 
and are not meeting basic electricity distribution 
requirements.  (Note.  Last year NERSA conducted a separate 
technical audit of Johannesburg's City Power electricity 
distribution network and found insufficient funds for 
maintenance and refurbishment, and a technical staff 
shortage.  End Note.) 
 
¶4. (SBU) NERSA estimates that an annual expenditure of R422 
million ($61 million) is required to maintain present service 
levels.  An additional R431 million ($62 million) will be 
required to eliminate an infrastructure refurbishment backlog 
for the eleven distributors.  NERSA plans to make 
recommendations to government on corrective measures to 
address audit findings and to motivate funding for the 
infrastructure backlog.  An additional technical audit of 
Eskom's Transmission Division began in January 2007 and a 
report is in the final stage. 
 
¶5. (SBU) Comment.  The country's combined lack of reliable 
generation capacity, limited transmission capacity and poor 
municipal distribution infrastructure has harmed business 
which suffers from prolonged and frequent power outages in 
various parts of the country.  Following the 2005 power 
outages which motivated NERSA to perform the technical audit 
of electricity distributors, the country suffered severe 
outages in December 2006, January 2007 and again this month 
(reftel) caused by major losses of generation capacity due to 
technical problems at power plants.  According to the 
government's 2006 annual report on ASGISA (Accelerated and 
Shared Growth Initiative, SA), "the economic cost of 
worsening national power interruptions and inefficiencies due 
to poor infrastructure is estimated to be between R2.9 
billion ($420 million) and R8.6 billion ($1.24 billion) 
annually, while the maintenance backlog is over R5 billion 
($724 million)".  The growing prospect of future power 
interruptions has also led to a boom in the purchase of 
private generators for industrial, commercial and residential 
use.  End Comment. 
TEITELBAUM