The council must find a solution to the tariff mess.
Ekurhuleni mayor Nkosindiphile Xhakaza is expected to present a report to council on Thursday about the suspension of certain fixed charges for electricity. But the mess might be bigger than the city’s communications indicate.
Xhakaza recently suspended the fixed charge of R109.78 (excluding Vat) for specifically single-phase non-indigent households (A2 tariffs) following violent protest in Tembisa, where residents were furious about the charge.
This was already an 54% increase compared with the previous year.
The suspension was meant to:
- Enable comprehensive, inclusive and orderly engagement with affected communities.
- Ensure that legitimate concerns raised by residents were systematically and effectively addressed.
- Mitigate the risk of recurrence of destructive and violent events such as those experienced in Tembisa during 2022.
In a press release issued on 22 July, Xhakaza explains at great length that Ekurhuleni is compelled by the energy regulator Nersa to levy fixed charges “aimed at ensuring adequate investment in infrastructure maintenance, long-term sustainability of electricity supply and equitable distribution of operational costs across all communities.”
He further emphasises that the charges are informed by a cost-of-supply (CoS) study.
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What Xhakaza failed to admit, is that the only fixed charge Ekurhuleni could lawfully have implemented is much higher, at R142.51 and that these consumers are not the only ones who are lawfully required to pay considerably more than the amount implemented.
To complicate matters further, on 1 July Ekurhuleni implemented the higher tariffs Nersa approved. After a storm of protest from councillors who relied on the numbers they approved with the budget, the city “corrected its mistake” and reverted to the lower council-approved tariffs a day later.
The amounts in the budget, which are currently implemented, and those Ekurhuleni asked Nersa to approve, differ substantially regarding residential customers in terms of fixed charges as well as the unit cost.
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Nersa approved exactly what Ekurhuleni applied for.
Schedule F – approved by council
A2 Residential – non-indigent
Nersa approved:
Source: Nersa.org.za
A resident of Ekurhuleni with a single-phase connection that is on this tariff, currently pays R627 (excluding Vat) if he uses 200 kWh/m according to the council-approved tariffs, while the tariffs approved by Nersa would have resulted in a bill of R708.25 for the same amount of electricity.
The difference is more than 12% for single-phase customers. Those with a three-phase connection using the same amount of electricity would see an even bigger difference of 15%.
That means Ekurhuleni added a considerable mark-up to the tariffs it consulted the public on and approved in council. Whether it was a mistake or a deliberate effort to mislead council and consumers about the extent of the increase, is not clear.
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Moneyweb tried to engage the city about the matter, but was told by a spokesperson that the electricity tariffs are expected to be discussed in council on Thursday.
Following Xhakaza’s statement that the tariffs are based on a CoS study, the question arises how the city then arrived at two different sets of tariffs and if the council-approved tariffs that he quoted are indeed cost-based, why it would submit higher tariffs to Nersa that would result in an over-recovery. Further, did Nersa interrogate how the city arrived at the numbers?
Electricity pricing expert Deon Conradie confirms that Ekurhuleni is not permitted to implement a different charge than was approved by Nersa, unless it goes back and applies for a change in the approved rates.
He is of the opinion that the council as implementor can decide not to implement the tariff charge and take the loss of income on the chin, or stop the implementation temporarily until they have received approval from Nersa to change the tariff.
How big that loss will be, is not clear at this stage. In the statement announcing the suspension, the city however states that the decision was taken after “assessment of potential risks.”
Several sources told Moneyweb they are trying to engage Nersa on the matter. Moneyweb sent questions to Nersa on 8 July, but has not received a response, despite several efforts to follow up on the enquiry.
Nersa for the first time this year published both the tariff applications it received from municipalities as well as the approved tariffs. Conradie advises consumers in all municipalities to check these tariffs against those approved by council to make sure there are no discrepancies.
This article was republished from Moneyweb. Read the original here.