Mantashe seeks comment on draft regulations enabling municipalities to buy own power

In a statement, Mantashe said the proposed changes were designed to give effect to President Cyril Ramaphosa’s State of the Nation Address (SONA) announcement that municipalities should be allowed to procure power from independent power producers (IPPs).

The City of Cape Town has for years been demanding to be allowed to contract directly with IPPs rather than Eskom and, in 2017, launched legal proceedings in an effort to secure that right, arguing that the Constitution mandated municipalities to provide power to customers.

Following Ramaphosa’s February SONA, Cape Town Mayor Dan Plato “cautiously welcomed” the announcement, but the city did not withdraw the court case, which, ahead of the Covid-19 lockdown, was set down to be heard in this month.

Mantashe said the draft amendments were aimed at clarifying the regulatory regime applicable to municipalities for procurement or development of power generation capacity.

“The amendments will ensure orderly development that is in line with the Integrated Resource Plan 2019 and municipal integrated development plans. Furthermore, the amendments will also ensure that Section 34 determinations by municipalities are feasible as they will be issued on the basis that they are supported by a feasibility study with minimum requirements as spelled out in the regulations.”

The amendments stipulate, however, that municipalities apply to the Minister to establish new generation capacity and that such an application be accompanied by a detailed feasibility study.

Municipalities would also need to demonstrate “sound financial standing”, which the regulations define as an organ of State being a “going concern” and that the financial commitments to be incurred by acquiring new generation capacity can be met either through an existing budget or in accordance with future budgetary projections.

The draft amendment also stipulates that any power purchase agreement be subject to Public Finance Management Act, Municipal Finance Management Act and Municipal Systems Act provisions and approvals.

The public had 30 days from the May 5 date of Gazette notice to provide comments.