City does not make a profit on sale of electricity

THE article “Outcry over electricity tariff increase” (Cape Argus July 2 2021) refers:

The City of Cape Town does not budget for a profit on the sale of electricity. All income from the sale of electricity is used to provide services.

The same goes for all services and rates income.

Some 65% of the electricity tariff income is just to buy the bulk power from Eskom. And this now costs 17.8% more. The City has absorbed as much of this massive Eskom increase as possible, but it is simply impossible to absorb such a high increase when one’s operations are already very efficient from work done over the years to trim fat and enhance business operations. Because the City manages its distribution network effectively, we are able to bring our tariff increases in lower than the Eskom charges.

There is no doubt many residents are facing unprecedented financial challenges. In drawing up the budget, we focused on how best to assist and support residents while keeping this organisation healthy enough to deliver on its core function, which is to provide basic and essential services. Hence you’d have seen the R3.4 billion in indigent relief allocated, a R4.1bn debt write-off incentive, and continuing support for all those severely impacted by Covid-19.

No other metro has been able to absorb as much of the costs of this big Eskom increase. If we were able to avoid increases, we would have done so in a heartbeat. But we need to be realistic. It costs money to provide services and input costs go up every year – most often above inflation. Tariff increases have been kept to the bare minimum.

Independent research reports affirm the City’s sound governance and prudent financial management. The City has the lowest tariff increases of all metros in the country.

IAN NEILSON | Mayoral committee member for finance