eThekwini Municipality supports the need to restructure the Electricity Distribution Industry and has played an active role in the many structures and workgroups looking into this restructure over the past 10 years.

Following the Cabinet Resolution dated 14 September 2005 eThekwini Municipality narrowed it's focus from the previous EDI blue print of six Wall to Wall" RED's to concentrate on the establishment of the eThekwini Metro RED.

With respect to the invitation to comment specifically on the viability of the proposed national or 7th RED eThekwini Municipality would like the Portfolio Committee to take into account the following main issues, '

1 ) In the absence of a Government approved national policy on cross subsidization within the Electricity Distribution Industry (ED I), the financial viability of the proposed National RED must not be at the expense of the end customers in the 6 Metro REDs. The six Metro REDS must be on a level playing field with the National RED so that all electricity customers within SA are treated fairly. For this to happen the input bulk tariff for the 6 Metro RED's must be cost reflective and calculated using the same methodology as that used for the proposed National or 7th RED. Substantial work has already been done on this issue over many years by Eskom, the NER and a stake holder task team for the Wholesale Electricity Pricing system (WEP's).

All proposed RED's, ie the 6 Metro RED's and the National or 7th RED must pay the Wholesale price, free from any surcharges, as the bulk input tariff from the Generation and Transmission components of the Electricity Supply Industry. It is unacceptable if the 6 Metro REDS must become "customers" of the National / 7th RED and be forced to absorb distribution related costs of the national RED. Prolonged cross-subsidies inevitable lead to inefficiency.

2) The issue of the so called “Contestable Customers" which consume more than 100 GWh per annum on one contiguous site, must be treated fairly and consistently in this EDI restructure. It is unacceptable to the proposed eThekwini Metro RED for any “Contestable Customer" located within our municipal area to remain with Eskom Key Sales or be transferred to the Proposed National / 7the RED. This would perpetuate the un level playing field for the "Contestable Customers" already situated within the eThekwini Municipal licensed electricity area of supply, where customers in competitive industries have electricity price advantages of disadvantages. With the creation of the 6 Metro RED's and the proposed National RED, all existing “Eskom" customers inside the Metro area must be transferred to the Metro RED's.

If required I am available to attend the PCC hearings on the 21st June 06. I would appreciate notification as early as possible to allow me to make the necessary flight bookings.

Yours Faithfully

HR Whitehead: Head: Electricity Service Unit