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The tariff mess the City of Tshwane made

AfriForum consults lawyers after failing to prevent implementation of controversial new electricity tariffs.

Civil rights group AfriForum is consulting its lawyers after its efforts to stop the City of Tshwane from implementing controversial new electricity tariffs failed on Monday.

National energy regulator (Nersa) refused to approve the city’s tariffs the previous Friday (June 28) after learning from AfriForum about concerns that especially smaller residential users could face increases to their bills of more than 80%.

Limited tariff reductions, which the city proposed at the eleventh hour through an email that reached Nersa after the meeting had started on Friday, raised more questions and the regulator refused to make a decision without proper motivation for the changes.

The city’s proposed changes included the reduction of a new fixed charge of R200 per month to R56 for all residential users except those living in complexes and buying electricity from resellers. They also provided for a large reduction in a new fixed charge for rural and agricultural users.

Such drastic changes deserve public consultation

However, regulator member Nomfundo Maseti said during the meeting that the structural changes the City proposed to its tariffs are so drastic that Nersa should hold public hearings to assess the impact on consumers before considering them.

The city nevertheless proceeded to implement the tariffs on Monday without Nersa approval, in contravention of the Electricity Regulation Act (Era). 

The new tariffs also put the business model of electricity resellers in Tshwane in serious jeopardy by the inclusion of a new fixed monthly charge of more than R2 600 and a demand charge for bulk residential service points. According to the Electricity Resellers’ Association of South Africa (Erasa) the new tariffs represent a rise of up to 400% in cost for resellers who do the internal electricity distribution in residential complexes.

In addition, the city has introduced the fixed charge of R200 per month for residential customers who buy their electricity from resellers.

This means these households have to pay R200 before using a single unit of electricity. 

For several years now, the city has designed its tariffs to allow a sustainable margin between the price at which resellers do their bulk purchases and the price at which they sell to customers. 

This has to be done within the legislative framework that requires customers buying from resellers to pay nothing more than those buying directly from the municipality.

In the new tariffs there is however no margin, Erasa told Moneyweb.

Resellers will be selling electricity at a loss. This is putting the electricity supply of about 150 000 households at risk, according to Erasa.

At the moment the resellers’ situation is in fact even more dire since members unanimously decided against charging households the new, increased tariffs. According to Erasa its members do not want to be on the wrong side of the law. 

That means resellers will be paying hugely increased bulk electricity bills, while only partially recovering their cost since they will be selling at last year’s tariffs.

The Tshwane Money Matter Caucus under the leadership of former DA councillor Lex Middelburg has also pointed out that the proposed new Tshwane tariffs will result in sharp increases in electricity costs for residents on small holdings and farm land.

What happens now?

How this situation can be resolved is not clear, since the Municipal Finance Management Act only allows municipalities to change tariffs at the beginning of their financial year on July 1, unless the minister of finance gives them special exemption.

Electricity revenue represents about 38% of the city’s budgeted income and if the last-minute reductions are approved, they would render the budget underfunded and put extreme pressure on liquidity.

Erasa says it has been trying to draw the city’s attention to its concerns since December and offered assistance in designing the tariffs, but was consistently ignored.

The city has issued a number of statements by its member of the mayoral committee for utility services Abel Tau, in which Tau refutes the concern about the tariffs as false and misleading. 

He did not explain why the city felt it necessary to make some reductions at the last minute.

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COMMENTS   27

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DA run metro? Thank goodness AFriForum is acting like a “watchdog.” They’ll just have to stick to the old tariffs till public hearings are held.

A least you have Afriforum fighting for you here.

In Cape Town, where the DA reigns supreme, they are free to fill in their blank cheques.

There are no checks and balances, no smaller coalition partner to keep them honest. They run roughshod over their ratepayers.

They added electricity connection fees (a nice monthly annuity income for them), monthly water connection levy (ditto), punitive water tariffs (Cape Town in permanent Level 3 water restrictions, now coyly re-named Level 1 with the same tariff structure as level 3) etc etc…

And lest we forget, they forced all owners of PV installations to register them (with a view to taxing them in future)

You get what you vote for. Capetonians gave the DA 100% hegemony.

What are you upset about? At least they’ll be able to boast about a clean audit and a healthy financial position. Isn’t that what DA voters care about? To hell with service delivery and considering the situation of the people

The DA has no choice.They are under huge pressure to donate tax paying citizens funds to the starving hordes moving to the Western cape to escape the squalor, poverty and hunger elsewhere. Its a thankless trap ultimately created by gross ANC incompetence and corruption elsewhere. Migration to the Eastern cape hell hole is minimal for a reason ie the ANC. Probably a third of people in the Western Cape were not there 10 years ago-maybe more.

Remember that a democratic election giving the DA power is such a red flag to the ANC they cannot cope. It angers the cesspit of corruption and theft from Luthuli house so their strategy is clear. Make the Western Cape weak through limited SAPS resources, migration of ANC voters and thus starve the DA

That old story – let me tell you something that will blow your mind: Migration to Urban centers doesn’t just had in Cape Town.

There are far and away more people who flock to Gauteng than the WC.

The fact of the matter is the DA charges absorbatant Tariffs in their municipalities because all they care about is the Auditor General’s report. They do not care about actually delivering services, at least not to the poor.

The Same is happening in Tswhane right now. They want to charge absorbitant fees so that when they 2021 elections come around they can boast about a clean audit.

Tshwane having a taste of DA style. You will find out what we go through in Cape Town. Clean audit is BS. Cape Town will never survive a forensic audit with their creative accounting.

I find it disconcerting that the DA really seems to be metamorphosing into an ANC light, as it has been ?jokingly? put.
Except, it is not funny anymore.
The DA (specifically in Cape Town) seems to be viewing their traditional (loyally paying) support base as a funding mechanism for some other agenda. Granted, the roads are still there, the streets are clean, the grass is cut, but I am feeling a financial squeeze for money that no longer seems to be fairly allocated.
I am willing to pay, but only so much.
You cannot be all things to all people and if you forsake your supporters they will eventually bite hard.

@ Thanda – would you be happier with an ANC-lead municipality providing no services PLUS no clean audits?!I’d rather absorb the exorbitant (two separate words) rates.

The DA has continued the ANC’s hopeless ineptitude since taking over in 2016.

I happen to live in Pretoria (and I refuse to use the fake name “Tshwane”, which didn’t exist prior to 1994.) I pay my accounts using Pretoria’s online system. So last month, I try to load a once-off debit as I’d done for years previously. Their system crashes. I try several times over the period of 2 days to load the debit. Eventually it accepts my once-off debit. Except the debit doesn’t go off my account as it always did previously. I get charged a R300 penalty fee by them, for a threatening letter they put in my post box, for my late payment due to THEIR system being defective. My complaints about their incompetence and my objection to being charged for their system bugs remain unanswerd a month later.

We also had a major power outage a while ago. No info forthcoming from our local DA councillor (I have the Whatsapp group messages to prove this.) Eventually, after repeated queries on the Whatsapp electricity group, the councillor, a person called Gert, tells the Whatsapp group that, if they’re unhappy, the citizens in his ward can go complain to the DA caucus in the city. No, really. THAT’s the DA’s attitude. Worse than the ANC.

The DA is worse or as incompetent as the ANC.

So the name is fake because it didn’t exist prior to 1994? What an arbitrary stance. Can I say that I refuse to use the name Pretoria because it didn’t exist prior to 1652?

Sympathy – I lived in Pretoria way back before the DA and what you’re talking about sounds hugely familiar! Not that I’m saying the DA in CT is perfect, but on the whole I’d hate to see the ANC return to the Western Cape after my long Pretoria experience under them. And of course, best of all, since moving to CT, no more tolls around every corner, or e-tolls for that matter. But yes, the DA’s handling of CT’s water crises was appalling.

@Thanda – there was no city prior to the 1880s, when a Voortrekker called Andries Pretorius and his followers founded it. Hence the name Pretoria – from Pretorius.

Never, at any point in history prior to 1994, was there a city called “Tshwane”, because the iron-age people in the area never created a city.

So no, my argument is 100% factual and not “arbitrary.” The fake name “Tshwane” was dreamed up by those who could not even invent the written word, let alone found a modern city. It was born out of their profound, yet accurate, sense of inferiority.

That’s the beauty of an organisation held accountable by your monthly debit order and not your vote once every five years.

i Will be forced to cut the Municipality Electricity cable from the Utility and live as in the old days with Coal and Gas.Sorry for Tshwane!

How does the council charge consumers that are supplied by resellers anything at all?

That said, there should be a national law against resellers except for specific instances. These leeches convince a body corporate that they will help handle metering & distribution. Then they take out the council meter and put in their own plus load managers.

Next thing you know they are making huge margin AT THE COST OF THE MUNICIPAL TAXPAYER even if they charge residents what residents would pay on a good old meter. Explanation:
1. They buy aggregated kVA of say 500kVA notified demand, but they charge 100 residents a monthly fee for 10kVA.
2. They pay time of use energy which ranges from less than a fifth to about double what fixed tariffs are. Except, using their load managers they shift clients out of the high peak tariff times. So peak times, no geyser no aircon no underfloor. Sunday lunch they make 400% margin between res tariff and their cost.
3. The protection racket comes from the custom meters. If the block wants to fire them, the block must replace their 100 meters.

Metering providers should only be allowed an admin fee per meter and they must be liable to replace their equipment with removed meters.
Electricity margin should belong to taxpayers not profiteers. Every million rand lost margin is a million more councils must get from everybody else.

Sounds like another SA business money making scheme. How is anyone be surprised?

Agree wholeheartedly about resellers!

See them supplying at light industry and take small business owners for a ride; read their contracts BEFORE signing, insist on the removal and adjustments to some contract clauses, etc.
Then, keep a close eye on meter readings and bills; one reseller changed the prescribed formula to calculate usage and costs, thereby inflated bills. Ask the Head of Electricity in the Metro what the formula should be as it’s not generally known, and check the cost charged against the reading.

i’m not an expert in this field. but based on your comment and where the resellers fit in the electricity chain, it looks to me that the reseller does not have any existing right to be in the reselling channel

The sooner a payment revolt the better. The above inflation increases will never stop unless drastic action by taxpayers are taken. Over time it will erode disposable income and capital gains.

Revolt at the municipal elections next time…

It will not happen. In cape town the citizens will always vote DA just not the get the ANC. Citizens still perceive smaller parties as a waste and hence no-one is held accountable. And off course in many towns and cities the taxpayers are in smaller number than the non-taxpayer. which makes political solutions fruitless.

High fixed charges is why I went off grid. Four years later with no bills and I am smiling. Do your sums.

Just confirms that politicians cannot run cities/towns/businesses. Period.

Smart mouths making promises they will never keep.

When a government is BROKE, they will tax the few remaining workers to death!! Then as the jobs leave (junk status/bonds sell off) it will crash. All these on the job trainee’s in “gubment.”

Talk about DA tariff increases, in Mossel Bay they just hiked property taxes with 15.9%, refuse also with 15.9%, secondly, more municipalities are implementing these so called “basic” electricity charges to counter the ever smaller sales of electricity units they make as users use less electricity due to being smarter or going off grid. The average tax paying citizen just can’t win.

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