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Nersa gives Tshwane business a tariff reprieve

City left with R150m budget shortfall.

The National Energy Regulator (Nersa) has shown some mercy to business owners in Tshwane by disallowing an average municipal tariff increase of 12% for commercial customers and between 13% and 16% for bulk commercial and industrial customers.

Nersa only approved a tariff increase of 8% for these customers. This reduces the average percentage increase for all Tshwane customers to the guideline of 7.39% and leaves the local authority with a budget shortfall of R150 million. See tariffs comparison table between Council and Nersa.

The revised tariffs have to be approved at a special council meeting scheduled for Wednesday, July 23. It should have taken effect on July 1 and Tshwane will have to apply it retrospectively.

Moneyweb earlier reported that the Tshwane council on May 30 approved an average electricity tariff increase of 8% after an extensive public participation process. In a surprising and unexplained move it presented an application for a 9.2% average increase at public hearings hosted by Nersa.

Lex Middelberg, councillor for the opposition Democratic Alliance responded by telling Nersa at the hearings that the application was unauthorised.

During the hearings Tshwane argued that its tariffs for commercial and industrial customers were below the benchmark and therefore a bigger increase was warranted. Regulator member Thembani Bukula challenged the wisdom of trying to close the gap in a single year.

Bukula also pointed out that the Tshwane application showed that the city would show a surplus from electricity collections, which further raises questions about the huge increase. Ndivhuwo Lithole, Tshwane deputy director for rates and revenue protection, who made the representation, said the information in the application was wrong and the city actually showed a loss on electricity.

Middelberg drew attention to the growth in Tshwane’s consumer debt in 2012/13 and electricity distribution losses of R623 million in the same year. He also pointed out that the city was planning for a total surplus of R1 billion and said it would therefore be unfair to punish consumers with high tariff increases.

According to the budget approved on May 30 the electricity tariffs were expected to generate R9.6 billion revenue in FY 2014/15, if an average increase of 8% was approved. That is 10.3% more than in FY 2013/14. In a report to councillors that will serve on Wednesday the chief financial officer said Tshwane will raise R150 million less than initially expected due to the lower tariff increase.

The report states that the Services Infrastructure Department will ensure that the shortfall is covered by increased credit control and minimising non-technical losses, a term that mostly refers to electricity theft.

If the department sees after the first quarter that it may not realise the desired savings, it should notify the financial department to make amendments during the adjustment budget, the report states.

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