That was the theme running through the public hearing on 18 May on the applications by 24 municipalities for an extra increase to their electricity prices.
The National Energy Regulator of South Africa (NERSA) has previously set the legal hike for municipalities to charge their customers at 1.88% and this is due to be implemented from 1 July.
The 24 municipalities applied to NERSA for permission to increase their tariffs by up to 12%.
The biggest hike applications are from Thaba Chweu local municipality (for a 12% increase), Msukaligwa local and Phumelela local (both 10%) and Magareng local (9%). Two metros applied for increases: the City of Cape Town (3.34%) and the City of Johannesburg’s City Power (2.28%).
Some of the 24 municipalities are in real financial difficulty: the National Treasury’s most recently available municipal quarterly accounts show that by the end of December 2016, Renosterberg (which wants a 6.4% increase) was R1.56 billion in the red, while Lekwa (wants a 8.5% increase) was R55 million overdrawn and Msukaligwa (10% increase) was R17m overdrawn. The metros which are best off: Cape Town with a cash balance of R1.2bn and the City of Joburg with R7.8bn.
Many of those who turned up for the hearings told NERSA they were heavily dependent on grants from central government, the municipal salary demands were “crippling”, they owed Eskom historical debt, they had aging infrastructure in need of repair and they had huge revenue losses due to customers’ failure to pay.
- Renosterberg told NERSA its collection rate was only 29% and it owes Eskom R41m.
- Phumelela told NERSA it owes Eskom R49m and has a collection rate of 88%.
- Dikgatlong has a collection rate of 65% and not enough money or skills to maintain the infrastructure.
- Rand West owes Eskom R120m.
- uPhongolo told NERSA the 5% increase it wants is to pay Eskom debt.
Joburg’s City Power told NERSA it needs to fix aging infrastructure and that revenue loss is due to faulty metering systems, theft and superfluous maintenance costs.
Cape Town told NERSA that salary demands were crippling, the connection of independent power producers was reducing customer demand, and that it was subsidising poor communities.
Many municipalities have effectively been operating with whatever income they’ve received for electricity and water – while failing to pay the Eskom bills or maintain infrastructure – so now need current consumers to pay for both current and historical Eskom debt.
A decision from NERSA is still awaited, so that municipalities can finalise their budgets and price increases before their new financial year on 1 July.
OUTA provided the only public input at the NERSA hearings on the municipal increases.
OUTA’s energy portfolio director Ted Blom told NERSA that none of the increases should be granted, citing a range of reasons from defective applications to deviant behaviour by the municipalities.
“This includes poor debt collection, high historical outstanding debts, poor billing records, non-existence of meters, large non-technical losses and massive overheads in staff,” says Blom.
“Poor management is no excuse to increase tariffs.”
OUTA is assessing the existing municipal tariff framework, NERSA’s process and timetable for setting these, as OUTA believes the framework is outdated, cumbersome, contradictory and doesn’t allow sufficient time for public participation.
In the DA’s first budget, the City of Joburg simply assumes NERSA will grant its tabled electricity price increase application.
“Electricity tariffs will increase by an average of 2.28% for residents,” said Joburg Finance MMC Rabelani Dagada in his budget speech on 23 May.
Joburg is still losing a substantial amount of electricity to theft and faulty meters.
“A 2015 report compared City Power with utilities from the other major metropolitan municipalities. It found that our non-technical losses on electricity are 2.6 times larger than the average benchmark. This equates to up to R2.2bn in lost revenue on an annual basis,” said Dagada in his speech, adding that the city’s power utility City Power gets an operating budget of R15.5bn and a capital budget of R3.8bn.
Dagada said “poor maintenance and lack of investment in our aged, overloaded electricity sub-stations results in regular loses of power in parts of the city”.
But OUTA’s Blom says that Joburg’s power prices are premature.
“That’s illegal because they haven’t been granted exemption yet,” says Blom, explaining that the NERSA cap of 1.88% applies until NERSA rules otherwise.
“As far as we are concerned all the increase exemptions are illegal because none of the municipalities have complied, as far as we are aware, with the requirements that an independent cost-of-supply exercise per category of tariff be done before tariff increases can be applied.”
back to ezine menu