The Parliamentary Standing Committee on Public Accounts (Scopa) says it supports efforts by State-owned power utility Eskom and the national government to resolve the growing municipal debt that contributes to the power utility’s weak balance sheet.

Municipalities owe Eskom R94-billion in overdue debt, the committee says.

In the current financial year, Eskom is contending with R8.9-billion in revenue that cannot be recognised in it balance sheet because municipalities do not have the ability to raise and pay that amount of money.

This figure increased from R6.3-billion in 2023 and is expected to double by the end of this year, Scopa highlights.

As part of Eskom’s municipal debt elimination proposal in the distribution agency agreement, the utility is prepared to freeze the collection of the amount in areas if municipalities accept assistance from Eskom with engineering skills, debt collection capacity and improvement of electricity distribution infrastructure.

Additionally, municipalities must stay up to date on their current consumption. If they stay up to date for a year then Eskom will write off 33.3% of the historical debt. They will write off the same amount if the conditions are met in year two and year three, which means all historical debt will have been written off.

Further, Eskom is recommending that municipalities move to prepaid metres. It is also recommending all municipal electricity revenue be ring-fenced for paying Eskom and maintaining electrical infrastructure, Scopa says.

Eskom will initially focus on the top 14 defaulting municipalities, representing 58% of overdue municipal debt.

“We welcome Eskom’s efforts to improve governance, operational performance and efforts to resolve the municipal debt crisis. We also call upon the Department of Electricity and Energy, Department of Cooperative Governance and Traditional Affairs, and National Treasury to move as fast as possible to implement the plan,” says Scopa chairperson Songezo Zibi.

The Eskom board and management appeared before Scopa on February 27 to respond to the audit outcomes and financial performance of the 2023/24 financial year.

They also outlined cost saving measures in the first six months of the 2024/25 financial year as well as future plans.

Eskom’s financial performance in the first six months of the 2024/25 financial year compared with March 2023 shows a projected profit of R10-billion for 2024/25 financial year.

Its profit before tax improved to R23-billion for the first six months of the 2024/25 financial year, up from R2.2-billion. Its operating profit increased to R46.3-billion from R20.9-billion, and revenue increased by 16% to R183.7-billion from R158.6-billion.

Its net finance costs have decreased to R17.8-billion in the first half of the 2024/25 financial year from R19.7-billion.

Debt securities and borrowings decreased to R395.3-billion from R412.2-billion in 2023.

Eskom’s earnings before interest, taxes, depreciation and amortisation increased to R61.7-billion in the first half of the 2024/25 financial year, up from R37.6-billion in the prior year.