Electricity tariff designed to be revenue neutral

THE letter from Mr Adiel Ismail (Cape Argus, October 26) refers.

The City’s cost of supply study shows that the Home User Charge is indeed roughly half of what it should be. The confusion around this may arise from a lack of understanding of costs involved in rendering electricity services.

Some costs, such as salaries and wages, capital expenditure, and repair and maintenance costs are incurred whether any electricity is used or not. Those costs are recovered through a fixed charge (the Home User Charge), as this is the most cost reflective method of recovery.

I’m not aware of any area that failed to receive any electricity for three months, as claimed by Mr Ismail. While we have had an excessive amount of load shedding, no one area is permanently switched off. Even if this were the case, as long as a customer is connected to the grid and can potentially make use of the facility, they need to cover their share of the costs incurred to make the service available to them, even if they do not utilise it. Failure to do so means someone else has to pick up that cost on their behalf.

Mr Ismail claims that for the 2022/23 financial year the City “sneakily” increased the tariff by more than was advertised, and uses fictitious numbers to make his point. The reality is that a customer using 1 000kWh per month in the 2021/22 financial year would’ve paid a monthly service charge of R168.95, a charge of R2.0873 for the first 600kWh (R1 252.38) and then R2.8805 for the remaining 400kWh (R1152.20), for a total of R2573,53 excluding VAT per month.

After July 1, these amounts increased to R185.00, plus R2.2856 for the first 600kWh (R1 371.36) plus R3.1541 for the remaining 400kWh (R1 261.64) for a total of R2 818.00 excluding VAT. Thus the monthly account increased by R244.47, which is 9,5%. Nothing “sneaky” there.

Any significant increases are entirely related to the customer’s level of consumption. The more kWh consumed, the lower the service charge becomes in terms of a c/kWh value.

The tariff was designed to be revenue neutral (meaning that the amount of revenue recovered remained the same; however, depending on consumption some customers would’ve seen larger increases and some may have seen a reduction in their account). COUNCILLOR SISEKO MBANDEZI | Mayoral Committee Member for Finance, City of Cape Town