The Nelson Mandela Metro will be the Eastern Cape anchor of the regional electricity distributor (RED), which will be responsible for the supply of electricity to the 44 municipalities in the province.

The RED is a government attempt to rationalise tariffs in the fragmented electricity industry, with consumers in the same municipality currently being charged different tariffs.

The RED’s other focus is to improve services to the consumer. The formation of RED means that the electricity service will no longer be the responsibility of municipalities but that of a new non-profit entity which will be formed as a Section 21 Company.

The metro’s electricity department will transfer all its assets, liabilities, commitments and staff to the Eastern Cape organisation, which will be known as RED 3. It will have a board of directors on which the metro will be represented.

A report tabled at a recent metro budget and treasury committee meeting said “all electricity income and expenditure will be reflected in the RED budget and not be in the metro budget.” The metro currently generates a surplus of about R120-million on electricity sales.

This income will be guaranteed by new revenue sources – the metro will receive a dividend for the shares held in the RED and it will be allowed to levy a tax on electricity sales within its area of jurisdiction.

Justifying the establishment of the RED, the report said: “Historically in South Africa electricity services have been rendered by municipalities.

“Since 1900, municipalities used to generate and distribute electricity. In most other countries this is not a municipal function and generally electricity is supplied by entities of a larger scale. There is no reason why the removal of electricity from the direct control of municipalities cannot lead to an equally or even more efficient dispensation.”

Municipalities are required to sign a co-operative agreement with Electricity Distribution Industry Holdings (EDI), a company formed to run the REDS, to show their commitment.

The metro has agreed in principle to the RED idea and will consult and work together with Buffalo City on implementing the changes.

Metro electricity and energy support services business unit manager Mvuleni Bukula said all the six REDS countrywide should be operational by 2007 and would not affect the supply of free electricity to deserving consumers.