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Cablegate: South Africa Municipal Electricity Distributors In

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

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