As Joburg residents suffer load shedding, it’s come to light that a full 28.17% of the electricity Johannesburg’s City Power purchased in the financial year to June 2014 was lost (2013: 26%) – the biggest chunk through meter tampering and theft.
The losses have soared since then. From June to December 28.8% was lost, City Power told Moneyweb.
Energy Measurement Consulting technical director Eric Bott says the 3.5 million MWh of electricity lost in that year would have been enough to supply 600 000 middle class households for a year.
The monetary value of these losses amounts to R2.3 billion in 2013/14, comprising R1.5 billion as a result of non-technical losses (theft and meter tampering) and R742 million as a result of technical losses, according to City Power’s Annual Report.
These values are calculated at cost. City Power says in its annual report if the electricity lost due to theft and meter tampering was sold, the city could have earned R3 billion. This is double the potential value of such losses in the previous financial year.
Of the 28.17% in the 2014 financial year, 9% was due to technical losses, which is not much higher than the norm of 8% for big cities, says Ratings Afrika analyst Leon Claassen.
But non-technical losses came to 19.17 %. This is a huge issue, he says.
City Power says non-technical losses are a result of among other things theft, the by-passing of meters, illegal decallibration of meters, damaged meters, faulty voltage and current transformers, billing errors and customers without meters.
The entity says it is trying to curb non-technical losses by installing automated metering systems, replacing faulty meters, the automation of systems to acquire new customers and change meters, an anonymous hotline to report theft, vandalism and tampering and random and targeted audits, followed by the removal of illegal connections and normalising supply.
City Power told Moneyweb it has set up a task team to address the problem and improve revenue collection, recover lost revenue and achieve accurate billing for large power users and domestic customers.
“The project has a six-month lifespan and we expect to see the outcomes over the next two years,” the entity told Moneyweb.
Bott , who has assisted City Power in some of its investigations, says corporate electricity theft overshadows that at residential level and many of the big culprits are electricity resellers. “The problem is that the cases have to go to court and it can take very long to recover the money.”
He says about 50 people have already been arrested as a result of City Power’s efforts to curb electricity theft, many of them officials who assist the culprits.
City Power’s sales dropped by almost 9% in the 2013/14 financial year and its revenue increased by a mere 0.07%, in spite of an average 7.05% tariff increase. The gross margin shrunk from 34.72% in the previous financial year to 27.6%.
Classen says the huge amount of money that City Power is losing is of great concern, since it could have been spent on service delivery. He says it raises questions about the management of the enitity. “The infrastructure is there; management should see to it that it is well managed and the money is collected.”
He says the loss in revenue will impact on City Power’s ability to do the necessary maintenance, which may lead to a further increase in technical losses. “Maintenance is the first place where people cut if revenue is under pressure.”
Claassen said City Power is of critical importance to the City of Joburg and its finances.
In 2013/14 more than half of the city’s revenue was from service charges and electricity income represented 61% of that – down from 63% in the previous financial year.
He said Johannesburg makes the biggest contribution to South Africa’s GDP and if production in this hub is hampered due to problems with City Power’s operations or finances it can impact the whole economy.