Cape Town council greenlights R5.1 billion electricity deal with Independent Power Producer

The City of Cape Town has approved multi-billion rand contract for the supply of electricity from an Independent Power Producer.

The City of Cape Town has secured a R5.1 billion contract with an Independent Power Producer, aiming to enhance energy security and reduce tariffs, despite concerns over its impact on residents.

The contract to be entered into with Make A Difference Ventures is one of the several multi-year tenders that span over three years.

“The rate of inflation under this contract will be based on the consumer price index as opposed to Eskom’s increases which are unpredictable and have shown to be considerably higher than consumer price index," reads the report tabled in council last week.

It further said the rate under the contract was lower than the rate the City currently purchases electricity from Eskom. Adding that consumers will benefit from the contract through possible reduction in tariffs and rate of tariff increases and the City’s savings over the 20-year period was estimated at R1.7 billion.

“The impact on tariffs will be less than what the City of Cape Town currently pays Eskom. The contract will further affect the revenue if the council resolves to lower the tariff the customers pay to reflect the cost of production,” reads the report tabled in council last week.

“The economy of Cape Town will significantly benefit with the attraction of businesses resulting from greater energy security and more affordable energy costs,” added the report.

However, ANC councillor Siyabonga Duka said his party was concerned that the contract will benefit the City more than the residents.

“The evidence before us is already raising the red flag as residents purchasing electricity through the City of Cape Town receive a smaller number of units than those purchased directly from Eskom. The question we must ask is whether the City will not be making direct capital investment into the IPP project and what would be the tangible way this arrangement will be beneficial to households,” Duka said.

“We risk endorsing a model where residents pay more for less and this has the appearance of a wolf in a sheep's clothing. It is presented as energy security and innovation, yet it may result in an increase of tariff on people who least afford it,” he added.

Duka also said the City should conduct a full cost of benefit analysis and ensure that public participation involved communities.

DA councilor Zimkhitha Sulelo dismissed the assertion that when residents buy electricity from the City, they get less units.

“It is our way as the City to recover the debt that needs to be recovered, and that we are not going to apologise for it,” Sulelo said.

She also said Mayor Geordin Hill-Lewis had at the start of the terms made a commitment to end the monopoly of Eskom in electricity supply when the power utility’s tariffs were exorbitant.