Joburg prepaid electricity customers in for a shock

A household could see an increase of almost 50% as the city works to level pre- and post-paid charges.
Most municipalities are under-recovering on domestic tariffs ‘because that is where the votes are’ – and Nersa has been allowing it. Image: Shutterstock

Joburg households and businesses using prepaid electricity are in for a shock if the fixed charges proposed in the city’s draft budget are approved.

It was tabled on Friday and stakeholders have until June 23 to comment.

The City of Johannesburg proposes a new R200 basic charge for prepaid residential customers and R400 for prepaid business customers.

That is over and above the increases to existing charges per kilowatt-hour (kWh) used, which are way above the current inflation rate. The proposal is for an 8.1% increase for residential prepaid and 5.8% for business.

In addition, the lowest tariff block for residential prepaid customers would be reduced by 50kWh to 300kWh, meaning that higher tariff blocks will be reached earlier in the month than before.

This means a household that uses 374 units a month will go from paying R527 to R780 per month, excluding Vat, from July 1 if the proposal is accepted – an increase of almost 50%.

Misleading disclosure

This is not properly disclosed in the document published for public comment because, in calculating the average increase per user group, only the increase in charges per kWh used is taken into account.

The city tried to introduce the R200 basic charge for prepaid residential users last year, without even including it in the draft budget, but scrapped the fee after Moneyweb disclosed it.

Read: Joburg’s prepaid electricity tariff shock

According to a report to the mayoral committee dated March 20 that Moneyweb has seen, the new charges are aimed at closing the gap between prepaid and conventional users.

It states that the: “Residential prepaid customer currently does not make [an adequate] contribution to the cost of operating and maintaining the electricity infrastructure to ensure its availability on demand. It is therefore proposed to introduce a capacity charge of R200/m for all residential prepaid customers.” (sic)

Closing the gap

If the city gets its way, it will increasingly be closing the gap between residential prepaid and conventional users over the next three years.

Residential users who have been buying electricity on credit are currently paying fixed charges of R527 per month. The city proposes increasing this to R757 per month, in itself a 43% increase.

In its budget document the city also understates the proposed tariff increase for conventional users at 8.1% by excluding the fixed charges from the calculation.

The introduction of the R400 basic charge for prepaid business customers is also aimed at closing the gap between them and conventional users. In the report to the mayoral committee it is proposed that this be increased by a further R400 next year.

Conventional business users currently pay between R800 and R900 per month in basic charges, with the unit cost only slightly lower than that of their prepaid counterparts.

The report to the mayoral committee states: “Currently customers on business tariff can avoid paying any basic charges by simply converting to the prepaid tariff. The business prepaid customer currently does not make [an adequate] contribution to the cost of operating and maintaining the electricity infrastructure to ensure its availability on demand.”

Proposed increases exceed Nersa guideline

According to David Mertens of the Nelson Mandela Bay Business Chamber, who has conducted a study of electricity tariffs, the increase the City of Joburg is looking for is well above the Nersa (National Energy Regulator of SA) guideline of 6.22% and will need proper justification.

Mertens says that while the new basic charges will be a shock to customers, they might be justifiable.

He says basic charges in the tariff structure can mitigate the risk of non-payment and electricity theft. If meter tampering results in undercharging, the basic charge will at least guarantee the municipality some income.

Mertens says most municipalities are under-recovering on domestic tariffs “because that is where the votes are” – and Nersa has been allowing it.

This results in other customer groups, especially industry, paying more to subsidise residential users.

“Domestic tariffs should work out around R2.00 to R2.20 per kWh on average and the current tariffs in the City of Joburg are well below that,” he says.

The cost of domestic users

Mertens says the rationale regarding fixed charges is clearly aimed at covering the substantial basic cost domestic users represent for municipalities.

While a fixed charge is in line with cost reflectivity and should be part of the tariff, the amount at which such a charge is set can be debated, he says.

“I think R100 to R150 per month or even R200 per user would not be unreasonable,” says Mertens. “R500 for conventional metering seems very heavy to me, but that might be the right measure to move people to prepaid and to get rid of non-payment.”

Mertens also notes that the City of Joburg has electricity losses of more than 20%, more than double the rate expected from a good distributor. The city would try to compensate for the loss through tariffs, he says.

“The big question is what the city will do to stem the losses and increase efficiency.

“The fixed charge might help in some respects, but the problem is much bigger than that.”

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Wow, a lot to absorb. I just paid OVER R7/kWh in Alberton. Can someone please direct my where I can find the tariffs or tariff blocks for Ekurhuleni? It seems there is no limit to what you may be charged, and yes, I use less than 400 units a month!

Join the Alberton Service delivery group here
https://www.facebook.com/groups/2234114936814203/

Seems like you may have gone over 700 units in a calendar month so you pay the premium rate of R6.97 per unit.

This is madness it would be cheaper to buy a diesel generator and run it non stop than pay this amount for electricity. Ideal strategy would be to use mains until 700Kwhr reached and then switch over to a generator for the remainder of the month.

Check on the Nersa website under Electricity>Tariffs> Local Authorities>Gauteng.

If people are paying an average of R7/kWh then somebody needs to go look at where the money is going. Perhaps it has to do with the fees charged by the payment gateways and metering companies? ie Total = R2.50/kWh plus RX transaction fee?

In theory (NERSA guidelines) council margin should not be more than 58% to 62% GROSS.

Guideline is not a rule. Obviously.

WOW! – can someone please remind the left hand what the right hand is doing.

The NCC has the populace on its knees because of the ridiculous economic lock down. As if that is not crippling enough, now you kick everyone when they are down and on the edge!

Some might actually be mistaken for seeing this as an experiment, to see just how far you can push the populace.

Please can we have an adult stand up and be a real leader, before we have our George Floyd moment on steroids!

Im a afraid Cyril Ramaposa has his blinkers on his ears and he cannot see anything wrong and chooses to do ZILCH…. each time.

He has NCC or some moron group doing things.

This PResident must get his act into gear.

People use the word equity a lot. Like as in “employment equity”. What does this mean? it means fairness. It has nothing to do with equality. People often ask what is a fair price. Economists argued for centuries and then concluded that a fair price was one agreed upon by a willing buyer and a willing seller. In South Africa there is a huge amount of cross subsidisation. This is equivalent to if I walked into the local supermarket and I paid R40 per litre of milk whereas the indigent dude behind me paid R5 per litre, some other dude gets it for free. The cost to the company would be R10 per litre. Unfortunately there are so many freebies the company is bankrupt. This is how municipalities are run. Soweto gets Eskom power for free but as Milton the Magic Midget says “No free lunch”. The taxpayer pays to subsidise Eskom which provides the freebie. What does Soweto supply in return? they vote ANC to perpetuate the theft. Whatever you call it, this is neither equitable nor fair for the power buyers in SA. The ANC has thus made parasitic thieves out of a large part of the community. A parasitic underclass who cannot or will not create wealth and consume wealth created by others. As a “right”. The debt racked up will never be repaid (it cannot as the wealth producing capability of Soweto is simply not enough to service let along repay a debt of this magnitude). A parasite can continue to exist as long as there is a host in attendance. I would nurture the host but the ANC have made them the enemy. They have declared war on the private sector, whites and white capital. Skills and capital have fled and will continue to do so. Yesterday Cyril called the economy “racist and colonialist”. Business and people who produce wealth are the enemy. Socialists always have a ready scapegoat for their multitudinous inherent economic failures. This cannot end well. When the ANC run out of other peoples money the infrastructure will collapse and the cradle will fall. The time is nigh. The SARB has lowered interest rates ridiculously. They have pulled out all the inflation control rods. Before Chernobyl blew up the, thermal power output of reactor four was a few MW and then all control rods withdrawn. Then the power rose exponentially in a few seconds and a multi billion dollar catastrophe unfolded. It is not negative and unpatriotic to protect yourself. Get your wealth out the country while you can. Arrogant Magnus with all his vested interests is bang on the button, folks. If you cannot, buy gold. Australian equities are incredibly cheap. I have just piled in. There are many ASX ETS and REITs in a stable well-run first-world democracy.

Very well said. In simple terms; busy killing the goose…….

We are having to deal with politicians who are arithmetically challenged. They know enough that they have to rake in the loot to keep living high on the hog, snout in the trough but not chase their voters away. With this binary, short term, self interested thinking, policy is obvious. Screw the payers even more; many don’t vote for us anyway and keep our voters poor, dependent on us and getting services free. Sadly, there is no good outcome to these policies.

The kilowat rate per hour currently is R2.17 not R7.00 in JHB south.

Did you read the article? Its about the total cost to purchase divided by consumption units, to determine the real cost per KwH… Not just the variable cost, include the fixed costs, for total cost per unit…

Another SA public schooler who can’t read.

If the city made a concerted effort to collect from non-paying consumers and sopping the theft of electricity the could afford to drop the prices of electricity.

If pigs had wings they would fly….

Yes, sadly. It goes against the patronage state.

All the councils are presently voting on their 2020/21 tariffs. It would be very interesting to see a news article that compares for a few use cases the total cost in the ten largest metros, plus compare it to the NERSA benchmarks.

I am not sure why NERSA bothers publishing benchmarks as they appear to approve anything that crosses their desk anyway.

This is what I got on Friday 27/05/2020

FNB Eskom Online.
Elec Amt:R90.00.Meter:013********
Credit Token:3201 5066 0048 2475 ****
Units:33.5kWh

Then the following day

FNB Eskom Online.
Elec Amt:R50.00.Meter:013********
Credit Token:4875 9256 5967 7481 ****
Units:18.6kWh

This is excessive for pro-poor government,day light robbery no matter the explanation of block tariff system,old people are going to suffocate.

Nothing wrong there. 33.5kWh for R90.00 gives R2.69 per kWh – so R50.00 buys you 50.00 / 2.69 = 18.61 kWh

So, what is the problem?

Literally a joke, they want to punish the people who are actually paying and helping Eskom cash flow. They should be pushing to get more people on to prepaid as it lowers admin costs and brings in the money… the mind boggles

South Africa will probably be the first country in the world to be economically viable for its citizens to generate and store their own electricity.

This will not be due to the technological advances (and resultant reduction in costs of for example solar panels and batteries) that has taken place over the last few years, but due to the corruption and inefficiencies of Eskom and the municipalities.

This ultimately reflects in their pricing structure, resulting in pricing themselves out of the market. As a country, this is something to be very ashamed about.

The cut over price for domestic solar is about R3/kWh. If municipalites are unaware of that, they will find out soon enough.

Yep. Now that solar is cheaper, R180K to get off the grid, including batteries.

In typical “Continental” fashion it will all end up in a big heap of cr ap.

These people can not think further than their noses are long. Its not sustainable and CR should realize this. Unfortunately people (including me) thought he actually knows what he is doing. He does not. He is just your typical run of the mill unionist.

A total failure.

In Klerksdorp, our local council calls it a “connection” charge on your monthly utility bill (…over an above actual elec usage cost).

Even if you are on pre-paid (you still pay this ‘connection’ surcharge).

And when there is loadshedding again…..the chance on getting pro-rata refunded, will be met with silence!

Mitigate from the the lose due to theft ! But stealing people including infrastructure sabotage people never pay.The ones caught depending where they are situated still refuse to pay.
This means again, few SA people will carry the rest.This will not matter if they can also afford to pay or not because certain places get cut off but others never !!

We would like to see how many houses are electrified, how many are buying electricity, how many are registered for indignant subsidy, how many get caught from illegal connection or meter bridge. Without this information there is no justification of this!
Example,I passby Westgate, Princess , informal settlement with Extreme visible known illegal connections. Traffic light was messed up because of this, transformer has been destroyed many a time but there is no hope in resolving this!
It been years and instead of things getting better they get worse.
I am sure one day someone will sue Gov, Municipality or Eskom when someone is killed or injured from these connections!

Wow! And we know where all that lovely extra money is really going to!
Why-our great leaders in the ANC created a huge stealing frenzy at Eskom together with the Zuptas and guess who will fill it.

The silly compliant middle class suburban fool. As a class of folk we have everything to be thoroughly ashamed of..ourselves…for doing nothing.

One chap, possibly drunk , get s killed in the US due to an unauthorised restraint technique and the country gets the message loud and clear that it is totally unacceptable. Here-the sheep queue for their booze, post complaints on Facebook, pay taxes and rates to a criminal clique and do ABSOLUTELY NOTHING!!

I recall the president saying that the price of electricity in S.A. was too high and needed to be reviewed. That was a few months after his election.
Typical ANC …. say one thing …… do the opposite.
Penalise the paying customers … subsidise the non-paying customers. What logic is that?

If all the municipalities had to pay what they owe we wouldn’t be in the position we in now
We pay our dues to get electricity
What about the people who don’t pay for electricity who have illegal connections
At a time like this we the paying community should be looked after and not be ripped off

Hello darkness, my old friend
I’ve come to talk with you again
Because a vision softly creeping
Left its seeds while I was sleeping
And the vision that was planted in my brain
Still remains
Within the REALM OF SOLAR

The theft and AA/EE/BBBEE-related mismanagement has no limits. Dumbabwe 2.0 is around the corner.

End of comments.

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