City of Cape Town snubs Nersa

Electricity users in the City of Cape Town are planning protest action for Wednesday 9 August – National Women’s Day – after the city implemented an average tariff increase of 17.6% on 1 July, the biggest in the country.

In doing this, the city ignored energy regulator Nersa’s decision to only grant a 15.1% increase.

Nersa has confirmed that it received several complaints and is investigating.

An unknown number of consumers no longer qualify for discounted tariffs aimed at helping the poor due to increased property valuations. They have seen their monthly electricity costs double.

Sandra Dickson of the organisation Stop CoCT points out that over and above the big increase, the city also charges a surcharge – which is not regulated by Nersa but authorised by municipal laws – of 37c/kWh.

In a statement, the city also confirms that it is in a legal battle with the regulator about the previous year’s tariffs.

“The city brought the review application and entered into mediation proposed by and subsequently cancelled by Nersa. The city will communicate further in due course following review application processes,” it says without giving any further detail.

Cape Town is one of only six municipalities that applied for increases of more than the Nersa guideline of 15.1%. The others were eThekwini, Msunduzi, Oudtshoorn, Swartland and Witzenberg.

Read: Some metros want eye-watering rates, tariff hikes

None of these applications were granted, and Nersa limited the increases for each to 15.1%.

Andre Beetge, DA-member of the City of eThekwini’s executive committee, has confirmed to Moneyweb that, unlike Cape Town, the city budget was adjusted to reflect the increase of 15.1% as approved by Nersa.

Cape Town’s mayoral committee member for energy Beverley van Reenen says Cape Town acted in line with municipal laws.

“The Nersa recommendation of 15.1% does not change the Eskom hike of 18.5%, which materially impacts the input costs for the city. The city spends about 70% of its tariff income to buy electricity from Eskom, with the remaining 30% covering the costs of a reliable electricity service and plans to end load shedding.

“The city would run an estimated budget shortfall in excess of R500 million for 2023/24 based on Nersa’s guideline tariff increase,” says Van Reenen.

“This shortfall would make it impossible and unsustainable for the city to run a reliable electricity service and implement plans to end load shedding.”

She says the city needs to recover its costs, which Nersa has to allow in terms of legislation and points out that Nersa’s tariff benchmarking methodology has already been reviewed and ruled unlawful in two high court judgments.

“In terms of the Electricity Regulation Act, Nersa must allow an efficient utility to recover its costs. It has again failed to do this.”

Majority wins

Anton Louw, councillor of the Good party in Cape Town, says his party opposed the 17.6% increase in council, but the DA used its majority to get it approved.

He says consumers are battling. “Not only the poor, [but] the middle class as well.” He says the city buys electricity at R1.74/kWh and often sells it at more than double that. In addition, the city has more than R10 billion in the bank.

The Congress of South African Trade Unions (Cosatu) in the Western Cape has also been outspoken about the large increase. Its representative, Motlatsi Tsubane, says it is a clear indication that the city considers itself to be above the law. “It is unacceptable.”

The organisation has laid a complaint with Nersa, with Tsubane calling on the regulator “to be transparent about the seemingly autonomous behaviour displayed by the City of Cape Town”.

Cosatu has vowed to mobilise support for its campaign against the increase and called on the Human Rights Commission to investigate the matter.

Public hearings

During Nersa’s public hearings, the city said it needed the extraordinary increase due to lower sales, largely on the back of load shedding.

Earlier, the city also criticised Nersa for approving municipal tariffs so late in the municipal budget cycle. “Once municipalities meet at the end of May to approve their budgets (in line with the MFMA [Municipal Finance Management Act]), they will not be able to address any changes Nersa may subsequently require until the 2024/25 financial year, as there is no process in existence (other than to resort to the courts) to change the council resolution once made.”

Louw, however, points out that Nersa announced its guideline in April. The City of Tshwane thereafter reduced the increase as it wanted to be in line with the guideline.

Brett Herron, MP of the Good party, says property valuations in Cape Town have increased rapidly in the recent past.

According to Louw, even small, low-cost houses are often valued at more than R500 000. This means the owners no longer qualify for the subsidised lifeline tariffs.

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To qualify for these tariffs the property valuation must be R500 000 or less, with the average usage being less than 450kWh per month. This gives beneficiaries free units every month, with them paying R2.11/kWh for up to 600kWh.

Property valuations

Natasha Gertse, a factory worker from Tafelsig in Mitchells Plain, Cape Town, is one of the affected residents. She saw the number of units she gets for R50 halve overnight.

On 1 July, she received 14 units instead of the 27 she got last month after the new tariffs took effect. “That is an increase of more than 100%,” she says.

She plans to lead protest action against the tariffs on 9 August.

“The only problem is that the same council we are protesting against must approve the protest,” she says.

The valuation of her three-bedroom house has increased from about R290 000 to R550 000, which places her in the domestic tariff bracket. She no longer gets any free units and now pays R3.50/kWh for up to 600kWh per month.

In light of the new valuations, the city increased the qualifying value from R400 000 to R500 000, Van Reenen says. Customers who have moved from the lifeline tariff to the domestic tariff because their properties are now valued at more than R500 000 after the General Valuation Roll (2022) may, however, qualify for rates rebates or indigent or pensioner support, she says. If they do, they could receive their electricity supply at the lifeline tariff on application.

“It is important for all to remember that residents with a property value higher than R500 000 may also still qualify for the lifeline tariff if their household monthly income is below R7 500.”

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