Cape Town’s poor spared electricity hike onslaught

In addition to various staple tariff increases, electricity for those within the City of Cape Town is set to increase by 7.78%.

“This is due to the impact of the Eskom tariff increase on the City but we have made sure that we increase our operational efficiencies as a way of limiting the increased burden on our residents and the increase is lower than in the previous financial years between 2014/15 and 2015/16,” stated Alderman Ian Neilson, the City’s Executive Deputy Mayor.

This was a result of an application on the City’s part for an increase above and beyond the approved guideline by the National Energy Regulator (NERSA) for municipalities.

“NERSA approved a guideline increase of 7.64% for municipalities. Therefore this means that municipalities will apply to NERSA based on the approved 7.64%. Municipalities may apply for more or less but will need to motivate anything above that,” remarked NERSA spokesperson Charles Hlebela.

City’s response

“We have demanded greater austerity to ensure that our average tariff increases are lower. That is why, for instance, we have managed to propose a lower increase in the electricity tariff despite the Eskom increase. Although approximately 70% of the electricity cost goes towards Eskom, the rest of the cost is carried by the City, for example in the operation and maintenance of the distribution network. It therefore does not have to increase on par with the Eskom tariff increase. This is one way that we are trying to keep the increases lower. We have had to look very closely at balancing the City’s operational needs with the reality on the ground and the broader context in which we are working,” explained Neilson.

Alleviating pressure on the poor

“As indicated above the increase to municipal customers is 7.64%. NERSA also approved incremental increases for the domestic customers through Inclining Block Tariffs (IBTs) in order to cushion the poor customers from higher increases,” stated Hlebela.

The City of Cape Town has also jumped on the bandwagon by moving all their ‘existing prepaid electricity customers currently on the subsidised Lifeline tariff, but whose property value exceeds R1 million, to the Domestic tariff as from 1 October 2016.’

What is the lifeline tariff?

The lifeline tariff is a subsidised tariff put in place to provide support to poorer households.

“In terms of the tariff structure, only households that meet the following criteria qualify for this subsidisation. Their municipal property valuation is R300 000 or less, they use less than 450 kWh per month on average, including any free electricity and they have a prepaid electricity meter,” highlighted Neilson.

He added, that should a customer receive a disability or a senior citizen rebate based on the Rates Policy, or be registered as indigent in light of Credit Control and Debt Collection Policy, the general stipulated property valuation and metering requirements fall away.

“Homeowners over the age of 60 whose household income is less than R12 000 per month currently qualify for the senior citizen rebate and it is proposed, in the City’s draft budget for 2016/2017, to increase this limit to a household income of R15 000 per month,” said Neilson.

This migration will allow the City to decrease the average tariff increase on the whole eventually for 2016/2017.

“Price increases from Eskom are having a profound effect on the local economy. With this in mind, it is important that only those customers who are truly indigent continue to be subsidised by other residents,” added Neilson.

A public participation initiative process on the City’s draft budget and the proposed tariffs, including the above proposal and property rates, is currently under way.

While the Eskom tariff increase has contributed to the proposed municipal tariff increase, the Eskom increase was implemented as of April, and municipalities will increase their tariffs in July.

“Those customers supplied by municipalities will only be affect by the 7.64% and not the 9.4%. The 9.4% applies only to Eskom direct customers,” explained Hlebela.