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Cash for power: Cape Town gets Treasury exemption to pay businesses and residents directly

Cape Town Mayor Geordin Hill-Lewis has announced the City can now pay cash for power fed into the local electricity grid. Businesses, and in time residents, will receive cash for selling their excess power into Cape Town’s grid. This after National Treasury exempted the City from competitive bidding processes not designed for the coming energy revolution. The sale of excess power by homes and businesses with Small Scale Embedded Generation (SSEGs), among other generation solutions, will contribute to Cape Town’s goal of 4-stages load-shedding protection within three years.

'The future is now, as we aim to immediately rollout the paying of cash for power. Payments to commercial customers will be possible before June, and within the year for any Capetonian with the necessary City-approved generation capacity. If you're thinking of investing in a solar system, it just got more attractive.

We aim to buy electricity from as many City supplied customers as are willing to sell to us. These customers may now produce as much power as they can from their approved systems and feed it into Cape Town's grid. Under this plan, we will also pay these customers an incentive over and above the NERSA-approved tariff as they help us turn the corner on load-shedding.

As our network of home power producers grows, so will our city's energy security. This has the potential to be a powerful force to end load-shedding over time, together with our Independent Power Procurement programme, and Power Heroes incentives for voluntary energy savings,' said Mayor Hill-Lewis.

The National Energy Regulator of South Africa (NERSA) has approved a rate of 78,98c/kWh for this financial year for the City to pay power sellers. The City also adds a 25c/kWh incentive tariff on top of this.

We are focused on ending load-shedding over time, and the City has steadily been laying the groundwork to enable payment for excess small scale power, including:

Dropping a policy requirement for power sellers to be 'net consumers' of energy, which previously only allowed for municipal bills to be credited for excess power, instead of actual cash payments

Commencing a wheeling trial for commercial and industrial users which is helping to iron out technical and billing issues ahead of mass-scale rollout

Allocating R15 million budget to pay for energy generated by small-scale embedded generators for the remainder of this financial year until June

SSEG and wheeling customers who want to feed energy into the grid need to have their system approved and have an AMI (Advanced Metering Infrastructure) meter installed by the City. This is a bi-directional meter that allows accurate reporting of the amounts of energy consumed and generated. We know this meter is still too costly for many, and we are working on finding an alternative option of comparable quality and reliability. Customers who want to upgrade their systems to make use of this existing development need to have the upgrade approved by the City.

Treasury exemption

At our request, National Treasury granted the Cape Town an exemption from competitive bidding / tendering processes that may otherwise apply to this process using section 3 of the Preferential Public Procurement Framework Act (PPPFA).

The exemption is necessary because South Africa's Public finance legislation did not foresee energy procurement from independent power producers, only from ESKOM.

The result is an insurmountable admin burden not suited to the dynamic, decentralised process of buying and selling electricity that is wheeled into the grid by a great number of small-scale generators all of whom are being paid at the same price (and at a cost that is cheaper than Eskom).

The requirement of a 'competitive bidder / single winner for goods and services' would make the wheeling programme a non-starter.

Aside from competitive bidding exemption, the City's power purchases will be fair, equitable, transparent and cost-effective in compliance with section 217 of the Constitution.

The City furthermore does not envisage entering into further contracts with feed-in customers, and is instead finalising a pro forma standard agreement.

Source: City Of Cape Town

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