Minerals and Energy Minister Buyelwa Sonjica on Tuesday welcomed Cabinet's decision to approve the restructuring of the R25-billion worth electricity distribution industry.

"Cabinet took a major and indeed historic decision on the 25th October... that we should as government proceed collectively and with a sense of urgency to restructure the EDI by creating six wall-to-wall Regional Electricity Distributors (REDs)," said Sonjica, who was briefing industry and government stakeholders, as well as the media in Johannesburg.

The minister said the REDs would be established as public entities in terms of the Public Finance Management Act, and their activities would be regulated by the National Energy Regulator of South Africa (Nersa).

The restructuring would see the amalgamation of Eskom distribution and the local municipal electricity utilities into REDs.

Power outages, regional tariff discrepancies and quality service would be key issues that the restructuring would approach.

The minister said ongoing outages, which occurred "on almost a daily basis across the country" due to lack of maintenance of infrastructure as well as other inefficiencies, were costing between R2.6 to R8-billion per annum.

In the past ten years there had been an infrastructure maintenance backlog around R5-billion, she said.

Fragmentation caused by both Eskom (the current main electricity distributor) and the country's 187 municipalities serving the same customers has "resulted in a situation where there are an estimated 2000 tariff regimes across the country".

The poorest, especially those living in the rural areas, were suffering the worst.

"Certainly, given the commitment of this government to eradicate poverty and build a better life for all, the situation could not be allowed to perpetuate any longer," Sonjica said.

EDI Holdings, a wholly state-owned company, is the custodian of the REDs creation process.

REDs would be anchored around the six main municipalities and would also have a business entity, said Sonjica.

"It's difficult to regulate municipalities, but you can regulate a service provider because it's a business," she said.

Cabinet last week noted an urgent need for the enactment of legislation regarding restructuring in the electricity distribution industry. Sonjica said the department was "almost there" in terms of taking this and an amendment on the regulation of the industry to Cabinet early in 2007.

"It will bring more certainty to the process," she said.

The department and EDI Holdings would be looking into how Eskom and the local municipalities, the current distributors, would be compensated for their assets.

"Eskom is still involved," she said.

The restructuring process was given a presidential deadline falling at the end of 2007.

Chief executive officer Phindile Nzimande told the minister on Tuesday EDI Holdings hoped to be able to meet that deadline.

EDI Holdings said that Red One, a pilot distributor, which had been operating as a private limited company in the City of Cape Town since July 2005, would become a public entity as well.

Sapa

SA COMPANIES & BUSINESS INFO Trying to find your way around South Africa's corporate landscape? Looking for a info on a particular company or sector? After the latest business, financial or market news? Here's a quick directory of links to get you started.

MORE BUSINESS NEWS China-Africa deals should be transparent Gates to receive Maties award Cutters fret over diamond bill Bank charges discourage saving New car records in October Govt, business to talk crime Bank competition is 'alive and well' Onion prices to make you cry Land restitution streamlined Hearings into bank charges start Electricity hurdles remain Trade deficit shrinks dramatically Airline price war erupts Minister welcomes power revamp New Clicks happy with drug fees