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Lines of Confusion

Online since 28.06.2017 • Filed under Editor's Choice • From Issue 21 page(s) 16-17
Lines of Confusion

South Africa seems to be caught in a web of spiralling costs, systemic abuse and a ‘pass-the-buck’ attitude among role players in the electricity supply value chain. This results in the Rands and cents buck landing squarely in the lap of the beleaguered consumer – be they commercial, industrial or residential.


Now it seems even domestic electricity users who legitimately want to get off the grid must bear additional charges that have the effect of subsidising heavy users. Therefore lower middle-class to middleclass ratepayers must bear the brunt of ill-conceived government policy.


Early in 2017, it became apparent that the City of Cape Town’s proposed budget 2017/2018 included a new charge to be levied on every property valued at over R 1-million. The proposal was contained in the sub-text of the City’s overall budget and has attracted several objections.


According to City of Cape Town Mayoral Committee (Mayco) Member for Informal Settlements, Water and Waste Services; and Energy, Cllr Xanthea Limberg, the proposed ‘service charge’ is a daily charge amounting to R246.30 over a typical 30-day month.


‘A portion of all revenue from electricity tariffs goes towards maintaining the service connections of residents. This cost remains the same no matter how much electricity is used on the property,’ explains Limberg.


‘Currently this cost is recouped via electricity sales (as a cent per kWh), however, under the current tariff formula only those who use 600 units or more are fully covering the costs associated with servicing their homes. This means that customers on the Domestic Tariff who use less than 600 units in a month are being subsidised by other users. It is not sustainable to provide subsidy to residents who are not considered financially vulnerable,’’, she tells To Build via the City’s very helpful media office.


Limberg explains that the City has sought to correct this by proposing the activation of the Home User Tariff, that allows the City to fully recoup the cost of providing services to Domestic Tariff customers who buy less than 600 units per month. Under the current proposal all customers with a property value over R1-million will be moved onto the Home User Tariff from 1 July 2017.


Rather than recouping the cost of maintaining the service connection via the unit price of electricity (i.e. a portion of the price of each unit services this requirement), customers on the Home User Tariff will pay this cost via a R8,21 daily service charge that will reflect as a separate item on their rates bill. While customers on the Home User Tariff would pay this fee irrespective of how much electricity they use, the unit cost for the first 600 units will be lower for them than for customers on the Domestic Tariff, which will compensate for this to varying degrees depending on how much electricity is purchased for the property each month. To Build asked whether this new charge is a result of consumers going off the grid and creating a reduced revenue stream for the City.


‘This impact is minimal, as the number of customers going off the grid is increasing, it is still relatively small,’ says Limberg. Meanwhile, sources close to the City, who did not want to be named, are concerned that consumers going off the grid will affect future revenues, and this is one of the reasons the City is implementing an independent service charge.


However, there are two major flaws in this approach, in the view of this editor. These are:

• The City has been incentivising off the grid, mainly rooftop generation – a carrot approach towards rooftop solar and feed-in tariffs and the like.

Communications in recent years have been directed at saving electricity and being more efficient. It has been a torch that the Mayor of Cape Town has borne herself on numerous public platforms. Now we see the stick. After incurring the expense of implementing energy saving measures and even going off the grid, these consumers must pay more – because of their efficient usage of the resource?

• Then there is the assumption that households valued at under R 1-million will take care of the poor. That is also a very questionable assumption. To Build is aware of numerous households where elderly occupants who draw state pensions live in properties valued at well over R 1-million. Their usage of electricity is very low – 200kWh in some cases per month - often a single person in the home. Now they must pay an additional R246 a month to fund a grid they hardly use?


Limberg admits that households using under 300kWh per month will suffer a 24.4% increase on their monthly accounts. According to Limberg, the costs being covered by the new charge relate to ‘the cost of maintaining the infrastructure from which residents draw their supply’.


Regulated, or not?

Once might well ask, why a separate line item for such a charge? Why not just hike property rates, creating a fairer dispensation for the recovery of grid maintenance and upgrade costs?


The National Energy Regulator of South Africa (NERSA), has astounded To Build with its refusal to be drawn on the issue. Despite a document on their website which clearly states that Cost of Supply needs to be motivated and approved by NERSA in a municipality’s annual tariff review process (ref. Clauses 4 and 7, in source document Determination of the Municipal Tariff Guideline for the Financial Year 2017/18 and the Revision of Municipal Tariff Benchmarks) NERSA spokesperson, Charles Hlebela, offers only this response: ‘Please note that NERSA does not regulate surcharges and levies. Please refer to the Municipal Fiscal Powers and Functions Act of 2007’. Are these not just ways of subsidising the Cost of Supply, which is regulated by NERSA?


Despite being sent detailed questions and six weeks to ponder a response to how far a municipality may go, he neglected to comment. However, there is precedent on the matter of a daily service fee.


The Municipality of Johannesburg spokesperson informs To Build that both a service charge (R112.02) and a capacity charge (R330.00) are levied on domestic single-phase users per month on their accounts. There is no separate charge for pre-paid users, although cents per kWh rates are higher than account holders. Businesses pay higher service and capacity charges.


It disturbs To Build that although the Municipality of Tswane’s media department was contacted on several occasions over six weeks, using the designated channels, no comment was received at the time of going to press. Given the above and the recent bad publicity at Eskom, one might well ask whether the country’s electricity users are being sent to hell in a handbasket?


Gareth Griffiths

Editor - To Build

E: editor@tobuild.co.za

Issue 21

Issue 21

July 2017

This article was featured on page 16-17 of
To Build Magazine Issue 21.

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