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Electricity: Who pays more?

Increasing share of household income is being spent on electricity.
Really poor households often get some sort of assistance, but the middle class is mostly on its own. Image: Shutterstock

Municipal tariffs are gobbling up an increasing portion of household income in South Africa, with especially electricity becoming almost unaffordable, says economist Mike Schüssler.

Of the amount Joburg inner-city tenants pay for their council bills, almost half is for electricity.

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According to data from the Johannesburg Property Owners and Managers Association (JPOMA), its council bill represented 14.05% of tenants’ household expenses in 2009/10. Now it is almost 24%.

The biggest increase (224%) over this period was in electricity tariffs, while salaries increased by 91% and rent by only 80%.

JPOMA’s members together provide over 40 000 affordable housing units, accommodating about 200 000 tenants, according to information on its website.

The struggle to pay for electricity is however not limited to these households.

Analysis

Using the tariffs approved by electricity regulator Nersa, Eric Bott, electricity expert from Energy Management Consulting, had a look at the total monthly electricity bill of different households in the metro councils and when buying directly from Eskom.

Schüssler compared this with BankservAfrica data on salary and pension payments into the bank accounts of South African consumers as a basis for his comments.

He says electricity costs amount to almost 13% of the average take-home salary in the formal sector.

In the informal sector income is lower and affordability is therefore an even bigger problem.

Schüssler says electricity costs represent 27.6% of the median private pensioner’s net income.

“Many people can simply no longer afford it,” he adds.

Really poor households often get some sort of assistance from their municipalities or other parts of government, but the middle class is mostly on its own.

Monthly electricity cost for small household using 500kWh (R)

Tshwane Nelson Mandela Bay Buffalo City Centlect (Bloemfon) City Power (Jhb) eThekwini Ekurhuleni Cape Town Eskom
Summer 1128.97 1039.80 1211.81 1019.90 1493.72 1063.30 905.40 1212.60 968.75
Winter 1166.62 1643.52

* Conventional meters; Vat excluded; summer and winter tariffs differ in only two cases.
Source: Energy Management Consulting

Notably small consumers in Ekurhuleni on the Gauteng East Rand enjoy the lowest tariffs, which are probably heavily subsidised by middle class households, as the following data shows.

Monthly electricity cost for a typical townhouse using 750kWh (R)

Tshwane NMB Buffalo City Centlec City Power eThekwini Ekurhuleni Cape Town Eskom
Summer 1799.47 1419.30 1790.78 1531.85 1941.97 1546.95 1823.54 1932.73 1642.03
Winter 1831.80 2166.67

* Conventional meters; Vat excluded; summer and winter tariffs differ in only two cases.
Source: Energy Management Consulting

The cost for middle class urban households exceeds R2 000 in every metro, with those in a few municipalities paying less that Eskom charges its direct customers.

Monthly electricity cost for middle class urban homes using 1 000kWh (R)

Tshwane NMB Buffalo City Centlec City Power eThekwini Ekurhuleni Cape Town Eskom
Summer 2469.97 2056.30 2369.76 2043.80 2390.22 2086.60 3721.14 2652.85 2315.30
Winter 2496.97 2689.82

* Conventional meters; Vat excluded; summer and winter tariffs differ in only two cases.
Source: Energy Management Consulting

Residents of Cape Town have been protesting high electricity tariffs under the banner of the organisation Stop City of Cape Town (Stop COCT). In response, the city first issued a statement to bust “myths” being spread in this regard, then mayor Dan Plato issued a statement blaming the Eskom monopoly for high tariff increases that are being forced on council.

Plato indicated that the current steps towards a liberalised electricity supply industry could enable the city to buy from other generators at lower tariffs.

He also emphasised that his council absorbed the Eskom increase to some extent and limited its tariff increase in July to 13.48%, while most other municipalities implemented a 14.59% increase in line with the Nersa municipal guideline.

Tariffs ‘too complicated’

Bott says electricity tariffs are too complicated for the lay person to understand and this makes it difficult to check bills and make comparisons.

Apart from inclining block tariffs where the extent of the blocks is not standardised among different municipalities, some distributors apply seasonal tariffs.

Commentators have also in the past criticised the lack of transparency in the nature and extent of cross-subsidisation among different user groups in a single municipality.

Bott says tariffs could be lower if municipalities and Eskom operated more efficiently.

City Power in Johannesburg, for example, loses almost 30% of its electricity – mostly due to theft – and paying customers have to compensate for those losses by paying higher tariffs.

Morne Mostert, head of local government affairs at AfriForum, says the cost of electricity is shockingly high as Eskom’s steep increases impact end-users. This, he says, increasingly drives consumers to alternative sources of energy. For smaller households it is however difficult to find cost-effective solutions.

Read: Electricity tariffs to rise 15% (Feb 2021)

He advises body corporates or residents’ associations to combine their efforts to achieve economies of scale. Otherwise, households that are already using electricity efficiently will have no choice but to downscale their lifestyles, Mostert says.

He says it is Nersa’s job to look out for consumers, and it should take note of the increasing portion of household income being absorbed by electricity cost.

“Nersa must keep this in mind when it considers applications from Eskom, but also from municipalities, for higher tariffs.”

Read: Eskom fights tooth and nail for massive price increases

Listen to Eskom CEO André de Ruyter discuss where the power utility currently sits, electricity tariffs, its operational outlook and his plans (in Afrikaans below) or read the English transcript here.

COMMENTS   31

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How about using less electricity?

How about in Joburg not having to subsidize the non payers.

Fixed charges approaching R1000/mnth no relief for pensioners who cannot afford to boil a kettle so that the indigenous hordes can use the entire output of a power station for free for ever. Such managerial prowess. So smart of them. So unethical. So increasingly evil. So slimy and typical.

How about Eskom getting its billing right!

When you use less electricity, the tariff goes up as it did the other day as there was a drop in consumption.

The tariffs may be ‘controlled’ by Nersa (I would like a much more independent authority to determine the increases), yet are the service and all the other charges also controlled? I doubt it as these charges make up the bulk of many people’s bills.
Eskom can easily cut its overheads drastically, yet is not pressurized to do so.

These electricity tariffs are nothing but a shake down to enable further corruption and incompetence. Small businesses are affected even worse.

This is one factor driving people to CT where there is less cross subsidize effect.

Unsustainable electricity price hikes are due to the ANC patronage over employment system and the ANC led municipaliiea never dealing with non payment or theft of the utility.

A small home of 3 people should be using less than 500kWh per month. In fact a large home with 1 geyser(on) and a pool should use less than 750kWh per month.

Please run energy efficiency articles.

Also some solar articles – eskom now allows net metering and feeding back into the grid

Generally speaking South African homes are built energy inefficiently. The latest standard for windows in Germany, for example, is triple-glazing which provide better insulation.

Electrical appliances are also marketed and sold based on their electrical energy consumption since the cost of electricity is top of mind for consumers in those countries.

When prices increase sufficiently consumers normally become creative in finding better ways of doing things. A solar geyser and some draft stripping could make a difference.

There is a tariff associated to exporting to the grid as well. And Basic charge tariffs are also increasing.

Prepaid meters have an effective tariff, so can’t dodge a bullet there. Only way to go, is for municipality to generate it’s own power through other parties, who can pay a small wheeling charge… but at provide power at a cheaper price (I hope) to municipalities who then sell the power to consumers.

Eskom will eventually, charge ridiculous rates for using their distribution network eventually once our communities are self sustainable. But anyways…. I’m just an observer. Pay my time.

Did you know that domestic electricity charges in some SA suburbs is now more expensive than electricity in the most expensive residential areas of London? Incredible as it may seem, this is fact!

Yes, but the UK uses a gas “power” in houses – Not a fair comparison…

The poorer society becomes, the higher the price of basic services to those that can afford it! This on top of rising taxes, rates and water…plus extra security charges as SA becomes more and more unsafe are making living here an unaffordable proposition. The results of the next election will dictate future services costs and efficiencies….I’m not holding my breathe!

Dont expect anything to change at the next elections. It doesn’t matter how bad thing get, the masses will still vote ANC – because the alternative is too “White”. Regardless of how bad things get, South African Politics is race based. Plain and Simple.

Someone has to pay for ANC corruption and it sure ain’t going to be the ANC.

When we have sound money policy, prices of goods and services will generally decrease this is due to a number of reason:
1) New Technologies create the same product and sell it at a lesser price because companies always try compete for market share, the more they sell the more they will make.
2) High prices also attract investment and new players due to the profit incentive.

But as we can see, the unsound money policies and state monopolies create artificially high prices due to their inefficiencies with corruption only adding to the toxic mix…

South Africans pay as much as the USA does for its electricity yet our purchase power is significantly less. What we are really paying for is the incompetence of the state and its inability to govern let alone run businesses.

With the margin added by municipalities, in many cases residential customers pay more than the US. The ANC saw an opportunity for self enrichment and so SA went from very cheap electricity tariffs to very expensive tariffs. This with the blessing of NERSA who are supposed to protect the consumer.

Housing committees are also greedy, ours has a kw/h charge of R2.42 for july
21. This seems to be a gross overcharge to me. But despite a complaint being lodged and accepted by the Ombudsman, it is being allowed and we have a KaK n Betaal situation.

Do not rely on the Ombuds people to help u, they are not there to help the members of a body corporate. It is just another money making scheme.

Please file a compliant with NERSA. A reseller is only allowed to charge APPROVED tariffs.

This is contrary to the Electricity Reseller Guidelines; but these regulations are no longer on NERSA’s website but is available on Eskom’s website [1].

This article assumes people are paying regulated tariffs, but in practice a vast majority of people in flats and gated communities are paying at least 75% more. Rental flats, sectional title communities are being fleeced despite the publication of the regulations and its non-enforcement. This is a huge scandal that deserves greater attention. This is an outrage that should be investigated all media houses and exposed.

It is unclear whether the Guidelines were ever enforced.

[1] https://www.eskom.co.za/CustomerCare/TariffsAndCharges/Documents/Guidelines_on_Electricity_Resale38120320161012141.pdf

In most cases the local council bylaws will determine that a reseller cannot charge more than a consumer would have paid as a direct council client. Your HOA cannot charge more.

Even when they do charge per bylaws they will make a bit of money based on a single bulk for say 200kVA but charging 20 consumers for 15kVA

Correct. Most municipalities have adopted the Standard Electricity By-law. Section 20.(2) of the By-law stipulates that: “The tariff, rates and charges at which and the conditions of sale under which electricity is thus resold shall not be less favourable to the purchaser than those that would have been payable and applicable had the purchaser been supplied directly with electricity by the Municipality. Every reseller shall furnish the purchaser with monthly accounts that are at least as detailed as the relevant billing information details provided by the Municipality to its electricity consumers.”
Municipal By-laws are as enforceable as any other law.

Remember, Eskam is just that . . . a big scam underwritten by the ANC!!

The Cape town spin doctor Plato says they only increased the electricity tariff by 13.48% He won’t mention the high increases over the last 3 years plus added levies that makes up for the current high charges.
Many Capetonians have been deprived of a hot meal and shower every day, intervals have been extended due to electricity and water costs.

The DA don’t/won’t realize how much damage the City of Cape town is doing to the DA brand with exorbitant utility charges and property valuations. Election time may tell a different story.

The compound annual increase, at 600kwh/month, in the CT prepaid tariff over the last 4 years is 6.36%, and that includes the fixed charge which was billed separately from 2018/19. Doesn’t strike me as excessive, bearing in mind the hydropower from Steenbras Dam spares us some of the loadshedding.

(Municipal property valuations are another matter entirely, there must still be thousands of objections and appeals outstanding from 2018 and the next valuation update has been postponed).

A possible unintended consequence of this inefficiency and thieving is that poorer people may start going back down the ladder of progress; burning wood or coal outside as they cannot afford electricity. As if the ANC care.

Correct, I am living in a small rural town, and my overall impression is that the collection of firewood just outside the town has only increased over the years.
If we did not have such a disastrous Eskom, with still a R 400 B + debt, which received R 220 B of govt bail outs since 2008, only R 41 B this year, and a totally incompetent, corrupt govt, we actually could see a drop of electricity prices over the next few years, as technologies have improved dramatically, and prices per kWh dropped enormously.

I am afraid the prices are going to skyrocket. This mad ANC are not going to use improved technologies but are planning to build a nuclear plant of 2500MW. I hope the same organizations that stuck a spanner into those boats that were going to deliver electricity will stick a spanner in this mad nuclear idea as I see corruption in this nuclear plant.

The problem with distribution is the tariff system. Electricity tariffs are built up by three cost levels, the generation cost, the transmission cost and the distribution cost. The end user only sees the distribution tariffs, which include all three cost levels. The problem is that Eskom, who holds the monopoly, sells electricity to municipalities at distribution tariffs, although they are not doing the distribution. The municipalities must then distribute the electricity at their own cost, which adds an extra level to the cost. Municipal customers therefore pay for distribution twice. As long as this is not fixed, you can not compare Eskom tariffs and municipal tariffs. The Department of Energy, National Treasury and NERSA are aware of this for more than 20 years (I know, because I was a member of the Wholesale Energy Pricing System (WEPS)
working group in the 90,s), but they have done nothing about it.
The huge differences in the tariffs of municipalities are 100% NERSA’s failure. They had the power to bring parity to municipal tariffs for the last 20 years and they have a written pricing policy, but they just can not implement it. Instead, they experimented with unworkable schemes, like the inclining block tariff, which will eventually leave the municipalities with only the subsidised customers, with the upper block customers all on alternative supplies, like solar.

Pack your s*** and get out of here & move your money while you at it. Don’t say I didn’t tell you 3 years from today.

End of comments.

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