Same business, different address: electricity cost +72%

Huge variance among different suppliers questioned.

A business situated in the City of Tshwane could be paying 72% more for electricity than if Eskom supplied it at its retail tariff – or 70% more than if it was situated in Durban.

There is no rational basis for this huge variance says energy expert Eric Bott, who has called on energy regulator Nersa to expand its revision of the methodology to determine Eskom’s tariffs to municipalities.

Bott, technical director at Energy Measurement Consulting, spoke to Moneyweb after the recent Nersa public hearings about the draft Eskom tariff methodology Nersa published for comment.

He did a comparison of the electricity cost for a small business over the period August 1 to September 1, applying the tariffs of different suppliers to the same business using 9 740 kWh on the same installation. This includes fixed and variable costs contained in the applicable tariff.

 According to Bott, the costs* would have been:

Supplier

Tariff

Total bill

Eskom

Business Rate 3

R14 377.77

Durban

Business & General

R14 377.77

Cape Town

Business Small 2

R15 667.21

City Power (Johannesburg)

Business kWh

R22 028.48

Tshwane

3 Phase Conventional 125A-150A

R24 982.53

*This picture might differ for other users.

 

Bott questions why electricity costs are so much higher in Tshwane and Johannesburg than in Durban. Durban is closer to the coast and therefore incurs higher maintenance costs on its infrastructure, and requires transmission over a longer distance.

He says while Nersa has to approve all electricity tariffs, the approval process focuses on the percentage increase for the following year. He says if the base tariff is not correct, it is no use scrutinising the percentage increase every year.

The regulator publishes a guideline annually to inform municipalities of what it considers to be a reasonable increase based on, among other things, the increase in Eskom’s bulk tariffs and the increase in the municipal cost structure.

Nersa used a benchmark in setting the municipal tariffs for 2016/17, where bulk purchases from Eskom represents 75% of the cost of supply (up from 73% the previous year), salaries and wages 10%, repairs 6%, capital charges 3% and other costs 6%.

It further sets benchmark tariffs for different customer categories.

Municipalities that apply for increases above the guideline or exceeding the benchmarks, are required to supply additional motivation and present their cases at public hearings about such increases.

Bott says despite the Nersa scrutiny, the tariffs vary substantially. He questions the basis of the different tariffs and calls for proper cost-of-supply studies in every municipality. “Most municipalities don’t have any idea what their cost of supply is,” he says.

Nersa has given municipalities five years to do such studies, and this period expires next year.

Bott says it is of utmost importance that the studies be completed and the deadline is not deferred, in order to find a more equitable regime for all customers.

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This is the same reason that Sasol is relocating from Rosebank (where it procures electricity from City Power) to Sandton where it will procure electricity direct from Eskom.

Why does the regulator allow this situation???

There’s a rumour that this is how most municipalities balance their books. Don’t charge rates, charge an excess on power…

Most likely because the regulator (despite being “independent”) is a parastatal as is Eskom, as is Telkom, as is Transnet and the list goes on.

Then there are of course the poster boys of parastatals, the SABC.

There is no logic applied in places where the “decision makers” do not possess the capacity for logic, are too corrupt to care, and are too busy looking in the mirror to see anything else that’s going on.

My son lives in a area that still falls directly under Eskom. The area I live in, the electricity is controlled by the municipality, but my tariff I’m charged with is much higher than my son’s tariff. I wonder why?

Someone needs to also investigate the new Tshwane industrial tarrifs now that they have outsourced the metering. After the outsourcing, our bill has almost literary doubled. Not too sure if this has something to do with the tender they awarded and went belly up and they need to recoup their money back or the private metering company is milking unsuspecting clients.

Someone needs to investigate the claim fromTshwane that the peak demand rate for electricity is R3.14/kw. This will kill business.

End of comments.

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