All the municipalities’ requests for higher-than-standard electricity price increases should be refused, says Blom, the energy portfolio director for the Organisation Undoing Tax Abuse (OUTA).
Municipalities which want to charge more than the nationally set annual increase of 1.88% must get special permission from the National Energy Regulator of South Africa (NERSA) for this and last week NERSA held the one-day public hearing on the 24 applications. Blom provided the only public input on these applications, arguing strongly against all of them.
Blom says all the applications are defective as they did not include audited costs for each category of user.
Some municipalities failed to turn up at the hearing to motivate their applications, another reason to dismiss them, he says.
“The municipalities’ applications for exemption should be rejected in full, and a proper enquiry constituted outside of the price increase timetable to interrogate the validity of each municipality’s tariff regime,” says Blom.
He told NERSA that the applications indicated “deviant or poor behaviour by management of these municipalities” and were thus their own fault.
“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.”
Blom says the municipalities’ tariffs are a mess, some municipalities illegally use electricity surcharges to subsidise other services, there is rampant fraud and overcharging in the voucher business and bulk purchases of electricity in residential complexes sometimes charge their residents higher than legal rates.
“OUTA has repeatedly called for municipal tariffs to be recalculated off a zero base so that exemptions and surcharges can be properly motivated,” says Blom.
“NERSA, instead of being the price regulator, has over the past 10 years only acted as ‘increase regulator’.”
NERSA has capped the municipal increases at 1.88%, which comes into effect at the start of the municipalities’ new financial year on 1 July. This takes into account the NERSA-approved 2.2% increase in Eskom’s charges to the municipalities from 1 April; the municipalities get a lower increase because Eskom’s bulk supply is only part of their expenses.
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%).
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.