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STATEMENT BY THE CITY’S MAYORAL COMMITTEE MEMBER FOR FINANCE, COUNCILLOR JOHAN VAN DER MERWE

The facts about the City’s electricity tariffs

There is much misinformation in the public sphere about electricity tariff increases at the moment. Firstly, that our vulnerable residents are no longer supported by the City of Cape Town and secondly, that our tariffs are higher than that of a metro such as Johannesburg.

These assertions are false.

The great majority of tariff increases for City services are close to or within the inflation range. Our energy tariffs at heart remain consumption based, so the less you use the less you pay.

We recover the cost of electricity to ensure that we provide reliable supply to all, including those who are vulnerable. Whether you use more or less, it costs us the same to supply electricity.

Our tariffs are structured to ensure that the most vulnerable residents remain highly subsidised and assisted in the most sustainable manner for the City.

It must be emphasised that our tariff increases have been lower than Eskom’s on average over the past 10 years, highlighting the good work done to contain operating costs.We do acknowledge that large increases in Eskom bulk electricity over the last number of years means electricity is no longer cheap. Many consumers have been buffered from this as they have been accessing the highly subsidised Lifeline Tariff from us. The Lifeline Tariff is below cost and due to the high level of subsidisation from other customers it can only be aimed at the most vulnerable households.

The City has for a number of years used property value as one of the criterion to automatically allow residents to access subsidised services. But with the change of consumption patterns, high value properties with more affluent consumers, but low consuming households, are increasing in numbers. With the current consumption-based only tariffs, they are not contributing an equitable share to the subsidisation of the most vulnerable households.

Accessing below-cost tariffs aimed at the most vulnerable is not sustainable or equitable. However, it is emphasised that limiting consumption will keep customers in a lower bracket of the Domestic Tariff.

In addition, our energy goals include sourcing at least 20% of our energy needs from renewables by 2020. The diversification of our energy mix will, it is expected, assist with the tariff structure in light of costs increasing every year. The only obstacle to achieving that goal is our own National Government who is preventing us from procuring renewable energy directly from independent power producers (IPPs). The City will therefore be taking the Minister of Energy and the National Energy Regulator of South Africa (Nersa) to court.

As it pertains to an inaccurate social media ‘comparison’ of tariff charges between Cape Town and Johannesburg metro, the facts are:  

  • No two metros are the same. Each metro will have a different mix of industrial/commercial/residential customers, and as such will have different levels of cross-subsidisation across these categories (and within categories as well). For instance Johannesburg City Power has a lot more big industries, so they can subsidise residential customers to a larger extent without the kind of impact on non-residential customers that the City of Cape Town would face.
  • The City also starts with an approximate 3% disadvantage compared to Johannesburg because we are further away from Eskom’s Megawatt Park. Eskom bulk prices (i.e. Megaflex etc.) include different transmission zones. The further one is situated from Megawatt Park, the more one pays. For example, on Megaflex, if one has a 132 kV connection, one pays 266,61 c per kWh for winter peak energy if one is in Johannesburg. In Cape Town one pays 274,70 c/kWh.
  • Nersa has approved City tariffs at about 15 c/kWh less than what they approved in 2016/17. This is due to questions with regard to Nersa’s authority under the Electricity Regulation Act to approve surcharges on the tariff versus the City’s authority under the Municipal System’s Act. Nersa had included the 15 c/kWh in their draft approval. Nersa has not applied this approach to all metros at this point and it is hoped that this is applied consistently next year for all metros.
  • Also, the wrong Johannesburg City Power tariff is being looked at. It must be borne in mind that Johannesburg City Power does not install prepaid meters in middle-oncome areas (customers may, however, apply to have these installed).

Please see the following comparison as it typically pertains to middle-income areas:

Johannesburg Cape Town
Typically a service charge of R452,09 applies + charge per unit of R1,1065/kWh  
Price for 500 kWh (incl. VAT) R1 146,09 R964,00
Price for 1 000 kWh (incl. VAT) R1 881,27 R2 094,56 * this is because of the subsidy lower-income consumers benefit from. The varied customer mix between the two metros also play a role.

The City of Johannesburg has also admitted that the Domestic Prepaid Tariff is subsidised and does not contribute its fair share of the costs, and may in future also be required to pay a monthly service fee.

The City of Cape Town will continue to do all that it can to keep increases across the board as low as possible, to ensure a reliable service and that those who require assistance, are supported in the most sustainable manner for the city as a whole.

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