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Third time unlucky? CoJ prepaid customers in for tariff surprise

New fixed charge means price increases of as much as 50%.
The city also wants to charge certain ‘affluent’ households an additional R50 a month for waste recycling. Image: Waldo Swiegers, Bloomberg

The City of Johannesburg will attempt, for the third year in a row, to implement a contentious new monthly surcharge for all prepaid City Power customers.

Under then mayor Herman Mashaba, it quietly reversed the R200 charge for residential customers in early July 2019, once it had already been approved.

Last year, during the Covid-19 lockdown, the council once again tried to introduce the fee. It managed to only pass its budget well into the new financial year, a day before the deadline given to it by the Gauteng government.

Read: City Power backtracks on shock prepaid charge (again)

In tariffs for 2021/2022 tabled in council in late March, the city proposes the R200 capacity charge for residential customers on prepaid, and a R400 charge for business prepaid customers.

It says these customers should “start making [an] appropriate contribution to the cost of operating and maintaining the City Power electricity distribution network to be available on demand”.

Aiming to ‘align’ customer types

The original plan was for these monthly charges to ratchet up over a three-year period to fix a broken tariff structure where postpaid customers are effectively subsidising those on prepaid. The city says “it is envisaged that the customer categories will fully align to respective comparative tariffs over a three-year tariff journey”.

Middle-income households on prepaid are going to face steep increases in the price of electricity, should these tariffs be approved. A customer using 450 kilowatts hour (kWh) per month will see a 44% increase in the price of prepaid electricity because of the double whammy of the steeper increase in the second block of tariffs, as well as the new fixed capacity charge.

For a prepaid customer using 700kWh per month, the increase is a more “muted” 32%.

450kWh 2020/21 2021/22
0-350 148c/kWh R518 169,69c/kWh R593.92
350-500 169c/kWh R169 194,65c/kWh R194.65
500+ 193c/kWh 0 221,8c/kWh 0
Capacity charge 0 0 R200 R200
Total R687 R988.57 44%
700kWh 2020/21 2021/22
0-350 148c/kWh R518 169,69c/kWh R593.915
350-500 169c/kWh R253.50 194,65c/kWh R291.975
500+ 193c/kWh R386 221,8c/kWh R443.60
Capacity charge 0 0 R200 R200
R1157.50 R1529.49 32%

The proposed tariffs seek a 14.59% increase for post-paid residential customers. This means the service charge for postpaid residential customers will be R169.29, while the monthly capacity charge will be at least R498.72 (for a single phase 60A connection).

Because of these sizeable monthly charges, City Power’s postpaid customers pay the most for electricity among the country’s major metros.

It says the “proposed increase to service and capacity charge is aimed at achieving greater balance between City Power’s revenue and cost structure by gradually increasing the contribution with a fixed income to more effectively compensate for the proportionally higher fixed cost structure of our operations”.

Consumption (per kilowatt hour) tariffs across the board will increase by this amount.

Exceptions

There are however three exceptions.

First, the increase to “conventional business customers’ energy charges (c/kWh)” will be limited to 10.19% “to gradually align to Nersa [national energy regulator] benchmark tariffs”.

Time of use tariffs for large power users (LPU) in the city will increase by 18.59% to “achieve greater alignment between this category and the LPU Demand category”.

And residential prepaid tariffs will increase by 15.59%. To achieve this without impacting poorer households, it proposes “to limit the increase to residential prepaid block 1 to 9.10% however the tariff applicable to block 2 should be increased by 18.1% to compensate for potential revenue loss to City Power while protecting the indigent customer consuming up to 350/kWh per month”.

Option for non-affluent areas

A further proposal seeks “to give [the] qualifying residential prepaid customer in non-affluent areas with no renewable energy installed except for solar water geysers, the option of a flat rate” of R200 per month “for the first 350kWh a month, provided installed circuit breaker capacity is limited 20A”.

While the “effective increase to municipalities and municipal entities over the Eskom financial year is … only 15.09%, … Nersa is yet to issue the FY21/22 draft municipal guideline increase for municipalities and municipal entities for implementation with effect from 1 July 2021”. CoJ says the “draft guideline increase is however likely to be 14.59%”.

Other proposed tariff increases are as follows:

  • Property rates +2% for all categories
  • Water +6.8% for residential/business (this may change once Rand Water announces its new tariffs)
  • Sewer +6.8%
  • Waste management (Pikitup) +4.3%.

Recycling levy

The city will also be rolling out its separation-at-source recycling programme throughout Joburg.

This is already in place in many of the northern suburbs and requires households to separate waste into two bags – a traditional black bag and a separate clear bag with recyclable items which is not placed in the Pikitup bin. These are collected separately.

From July, it is proposed that: “Affluent households at various suburbs excluding those located in areas classified as township and informal settlements will be charged [an] additional levy at an amount of R50 per month for all properties with a market value above R350 000.”

The closing date for public comments is May 8. Further details are available on the city’s website.

COMMENTS   22

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Different day , different name – same shake down.

Paying for the grossly unproductive staff and salary bills. Effectively managed it would never come to this. No municipality is exempt from this, including the DA run ones.

If I am not mistaken power is more expensive in Cape Town? I pay 211.5c a Kw. Soon to be 238c a Kw.
So what is Joburg complaining about?

Ekurhuleni paying 2.37 kW. That since June 2020.

Prepaid in a so-called Retirement Village, Honeydew Manor, Roodepoort R 2.55 kWh

Talk about day light robbery.

Here is the thing, if the consumer is expected to pay first world prices then surely they should revive first world services.

I am not only talking about No Power Cuts but also carbon free electricy.

South Africans pay as much as American citizens do per KW but be it with 50% less purchase power.

Tax payers are like employers, they have to guarantee wages, transport, medical, pension contribution and bonuses but the state like the employee cannot guarantee that they will work nor be productive.

Even worse is the fact that we own the coal we use and not import it like most of those other first world countries, which is the reason why our power should be cheap. Yet it isn’t.

@Alienmaster,
Very true but the current price we are paying is for the anc’s short comings and inefficient governance abilities together their various form of looting.

Socialist Societies never progress, they simply stagnate and regress regardless of the distributed wealth, because that is it nothing to do with generating new wealth but rather squandering current value. Everyone in the greater community will be equally as poor and miserable as his neighbour.

South Africa is ranked 3rd on the Bloomberg Misery Index for 2020, just behind Argentina a dishonest bankrupt state and Venezuela an oil rich nation that has to import the product at which it gets cheaper elsewhere in the world to meet is contract agreements.

https://www.bloomberg.com/news/articles/2020-08-06/misery-ranking-will-show-u-s-getting-worse-versus-rest-of-world

Municipalities should not use electricity or water sales as an income generator.

They then hike electricity prices beyond the hikes of Eskom’s, the sole bulk supplier, and then do not pay Eskom.

Also prepaid users should be paying slightly less for the risk of payment to have been taken away for the supplier.

This and the issue that the electric meter never get amortized by Nersa.

There is a massive problem on this issue of councils relying on electricity profits to cover other shortfalls.

In most councils, electricity is between 50% and 70% of revenue with rates & taxes and government transfers making up the rest.

NERSA allows about 60% profit to be added onto Eskom cost when designing municipal tariffs. A chunk of that 60% goes toward paying for the council’s electricity department but by far most of the profit goes into the profit bucket from which council covers its other non-profit centers and the municipal gravy train.

What is completely absurd is that when Eskom goes up 15% the tariffs go up 15%. So, by some weird coincidence, councils’ electricity department and their loss-making services costs also went up 15%

The scheme of profits from electricity is about to run out of headroom, as the law of compound increases invariably will. By 2023 it will be cheaper to run our factory on diesel than on municipal power. (I mean all the time not just in loadshed).

i know it is easer said than done, but now is the time where the clients of the monopolistic power supplier, eskom,(the user of bought and paid electricity) must say up to here and no further with tariff increases to finance eskoms incompetence and negligence over how many years
the user of electricity is now used to help refinance capital as well as running cost whilst nothing was done in the last 20+ years.
ironically the demand for their product is higher than what eskom can deliver, but the price is still going up – it is acting as a scarce product due to eskoms own failure in every aspect as a bussiness.

The anc must disband so that someone can save this country from total destruction.

These vampires (CoJ, City Power, Eskom, other SOEs, national govt) are determined to suck every drop of blood(life) out of hard working people. Sadly daylight does not repel them away from you. The absurdity can only make you laugh at this point, the tears have all dried up and the anger has faded to futility.

JHB is not the most expensive

In Paarl, post and prepaid residential tariffs are R247pm fixed plus energy charges of 171c to 400kWh and 238c over 400kWh.

I have studied and worked with electricity tariffs since 1981 and firmly belief that a basic tariff should be part of a good tariff system, for reasons that are too many to elaborate on in this space. The important thing here is that the municipality should not just add a basic charge to the existing kiloWatthour tariff. The cost of the two tariff compoments should be balanced to reflect the real cost of supply. If they have good statistics of their sales and costs, as they should have, it is not difficult to calculate. It is a fact that many municipalities is using electricity as a source of revenue, because it is the one service, if managed correctly, that can derive a contribution from all households. It should not be messed up by poor decision making.

Auretha:

It would be interesting to plot out the revenue composition of the largest councils, excluding central allocations as that can distort across years quite a bit depending on major projects.

I had a look at https://municipalmoney.gov.za
(actually quite a useful site even if the data is not 100% current)

There are places around me where electricity revenue to rates & taxes revenue ratio is 2:1 and others where that ratio is 6:1.

Some councils are going to hit a wall on electricity revenue reliance and plain unaffordability. When they do, they will get a backlash when they have to increase rates & taxes 400% to try and get to a normal income distribution.

The other monster coming : when Eskom unbundles, businesses will relocate to Eskom Distribution areas. eskom Distirbution only needs to recover their wholesale cost plus their distribution cost in tariffs. Councils recover that plus another big chunk for other non-electricity services, yet Eskom Distirbution benefits from those other services…

HKGK

Nearly 50% of distribution areas already belong to Eskom.
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 see 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, although the distribution is only done once.
Through the years I have argued this point on several occasions with people from Eskom, NERSA, Department of Energy and even National Treasury. I had numerous promises that it will be investigated, but nothing came of it.
As long as this is not resolved, there is no chance that there can be parity between Eskom tariffs and municipal tariffs.
I do agree with you that some municipalities rely too heavily on electricity revenue, but, as it is the case at national level, it is a very small percentage of a town’s people who pay for other services and taxes. Electricity is in many cases the only service that is paid for by the majority of the people. If it was not for electricity revenue, the few actual taxpayers would not be able to carry the burden.

So now we have to pay for a recycling programme that will likely never happen? Thanks, but we do our own recycling.

This is why I always used to live in egoli gas suburbs, at least when you buy 1 unit of energy you aren’t paying for 3 units. (1 for yourself, 1 for the subsidised indigent household, and 1 for the person who just steals it) The resulting low electrical peak load makes the switch to solar much easier too.

Demographic wall has been reached. Too few people with money have to fork out for the breeders who want everything for free.

Sorry SA but you are now doomed

The real reason for the imposition of the basic charge of R200 is to offset the losses due to households bypassing the electricity system and failure to take action on illegal connections. Its much easier to penalise those electricity consumers who pay than to go into the informal settlements and face the wrath of the squatters.

So rates are going up by 2%, water and sewerage by 6.8% and Pikitup by 4.3%. With the R50 levy, refuse is actually increasing by 18.9%, very clever move. The average person’s bill will increase north of 6.5% and we haven’t even taken into account the electricity increase of about 15%.

End of comments.

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