Nersa approves 7.6% power hike

Louise Flanagan and Staff Writer

MUNICIPALITIES will increase electricity prices by an average of 7.64 percent from July 1.

Yesterday, the National Energy Regulator of South Africa (Nersa) said it had approved the price hike for the guideline municipal tariffs.

If municipalities want to charge a higher increase than that, they must apply for special permission.

Yesterday the City of Cape Town announced that it would move its prepaid customer who had been on the LifeLine tariff to the Domestic tariff for properties exceeding R1 million.

The LifeLine tariff will now only be available to prepaid customers whose properties were valued at less than R300 000, or used less than 450KWh per month.

The increase follows the recent Nersa approval for Eskom to increase its prices to its direct customers from April 1 by an average of 9.4 percent. This includes increasing the cost of bulk electricity sold to municipalities by 7.857 percent.

This includes increasing the cost of bulk electricity sold to municipalities by 7.857 percent.

The overall increase granted to municipalities to charge their customers (7.64 percent) is lower than Eskom’s increase in the bulk electricity price to municipalities (7.857 percent) because the cost of buying bulk electricity makes up about 75 percent of the municipalities’ costs.

The rest of the municipal costs – staffing, repairs and capital expenditure – make up the rest of the costs, and all have lower projected cost increases.

Bulk electricity is now expected to take up slightly more of municipal electricity budgets, going from 73 to 75 percent of the cost.

To compensate, capital expenditure drops from 4 percent to 3 percent, while staffing and repairs remain the same at 10 percent and 6 percent, respectively.

Nersa said an efficient municipality would spend about 75 percent of its electricity costs on buying bulk electricity (the “tolerable range” is 58 to 78 percent), would have a surplus of about 15 percent and would have system losses of about 10 percent.

An efficient municipality would also have an average sales price to average purchase price ratio of 1:1.58, spend at least 6 percent of its electricity budget on repairs and maintenance, and have a debt-collection rate of 95 percent.