The proposed surcharges for electricity distribution in the City of Joburg, and envisaged review of the municipal tariff structure to reflect the Cost of Supply (CoS) in the open access electricity market is likely to break the back of consumers already overstrained by an underperforming economy.
This comes as the R200-a-month surcharge has drawn a chasm in the political leadership in the City of Joburg.
The DA in Gauteng yesterday said it had written to the mayoral committee member (MMC) for finance to urgently review or do away with this electricity tariff surcharge and provide clarity on the business surcharge and how it will be utilised to the benefit of residents.
A legal wrangle is also in the offing as the National Energy Regulator of South Africa (Nersa) has been enjoined by the SA Local Government Association (Salga) to try to overturn a court judgment favouring AfriForum.
The North Gauteng High Court last week ordered that municipalities whose cost studies are absent will have to continue charging electricity tariffs based on the existing rates approved for the 2023/2024 fiscal year.
Political science lecturer and associate professor at North West University Piet Croucamp yesterday said the impact of the surcharge on consumers would have a massive effect, particularly on low-income households some of whom could not afford the R200 already levied by the City of Joburg’s electricity entity, City Power.
“These increases have already broken the camel’s back in lower-income households, and middle-income households are also under a lot of strain,” Croucamp said.
“There would have to be a review of the subsidies to power households but even for middle-income earners, the government might have to eventually consider a subsidy of sorts,” he said.
Fanie Brink, an independent agricultural economist said any increases added to the consumer in the current economic environment were detrimental, as there were a myriad problems including job scarcity, noting that Eskom’s aggregate standard tariffs have increased at almost 15% per year since 2010, compared to the average CPI inflation of about 5.2% over this period.
Energy analyst Mthunzi Luthuli said the new service charge in Johannesburg will have a massive impact on households using prepaid electricity which will likely lead to legal trouble for the City.
“City Power has claimed that this is necessary to recoup some of their infrastructure and service costs,” Luthuli said.
“But this is problematic in the way that it was done because (the surcharge) is seen as over and above the prepaid electricity tariff increases. I don’t think this can be justified, and the City will probably be taken to court for it.”
DA Johannesburg caucus leader Belinda Kayser-Echeozonjoku said they had warned the ANC/EFF/PA-led City council that an increase of 12.7% and the additional service charge on prepaid customers was and would continue to be unfair.
“There is also confusion between business surcharge and residential surcharge, there has been no detailed communication on how it will be administered and utilised by City Power and residential properties are being charged business rates and surcharges,” she said.
“We urge residents to check whether their prepaid electricity meters are registered as residential or business and to query this with the City. Unfortunately, this is not something that a ward councillor can assist with.”
According to energy expert Chris Yelland the service charges mean that prepaid users will effectively see a 45% to 65% tariff hike, when factored into the overall tariff increase.
Nersa acknowledged that the CoS studies may lead to tariff increases, rather than the decreases that are widely expected.
Industry insiders said the new tariff regime may not reflect the true CoS as depreciation costs cited by municipalities were not accurate, with most not having asset registers and “the depreciation costs claimed were at best a thumbsuck.”
According to analysts between 1988 and 2007 electricity tariffs increased by 223%, while inflation over this period was 335%.
From the 2008 electricity crisis onwards, there is a clear and sharp inflection point for electricity tariffs in South Africa.
From 2007 to 2022, electricity tariffs increased by 653%, while inflation over this period was 129%.
Thus, electricity tariffs increased four-fold or quadrupled in real money terms in 14 years.
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