(Bloomberg) -- Cape Town, South Africa’s second-largest city, is in talks with Eskom Holdings SOC Ltd. to take over the supply of electricity in areas of the metro served by the state power utility.
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The municipality oversees the provision about 70% of the power used in the city, with the remainder falling under Eskom. The discussions, which started about a year ago, form part of Cape Town’s plans to reduce its reliance on the beleaguered utility that’s subjecting the nation to record blackouts.
“We want to supply the entire city,” Mayor Geordin Hill-Lewis said in an interview. City officials are “engaged in some rather delicate negotiations with Eskom” and are awaiting written confirmation as to whether its board wants to proceed with the project, he said.
Cape Town, which is the country’s main tourist hub and has been led by the opposition Democratic Alliance since 2006, has the most advanced plans to secure its own power. It requires peak supply of 1,700 megawatts in winter and 1,600 megawatts in summer, said Kadri Nassiep, the city’s executive director for energy.
Eskom imposes outages in numbered stages, with each equating to 1,000 megawatts of national demand. Cape Town currently protects businesses and residents in city-supplied areas from about two levels of power cuts by utilizing generation capacity from a hydropower plant that it operates. It aims to secure sufficient additional supply to avoid the first four stages of blackouts.
South Africa’s electricity supply areas are determined by law, and holders of distribution licenses have exclusive authority to provide power and operate electricity networks in specific zones, Nassiep said. The city will have to budget for infrastructure development and maintenance, taking over customer debt, addressing connection backlogs, bolstering capacity and challenges associated with electrifying informal areas in zones it intends to take over, he said.
The timing and price for the takeover of infrastructure in Eskom-supplied areas has yet to be agreed. The city will consider funding the initiative through capital expenditure, issuing debt, using national infrastructure grants and drawing down on some revenue it generates from property rates and taxes, Hill-Lewis said.
Eskom acknowledged that Cape Town had expressed an interest in taking over some of its operations. A mandate for continued discussions is being “revisited” within the company’s governance structures, it said in an emailed response to questions.
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