For all the years, the municipality has implemented the Nersa-approved tariff
WHILE the Sol Plaatje Municipality has come under fire for high electricity costs, the tariff increase of 7.5 percent, which is set to come into effect on July 1, is actually below the stipulated Nersa increase of 7.64 percent.
The high cost of electricity in the city was highlighted recently by the Northern Cape branch of the Young Communist League of South Africa (YCLSA) who said in a statement that the cost of electricity was higher in the city than in other similar municipalities.
“The Sol Plaatje Municipality (SPM) has indicated that it will increase electricity prices by an average of 7.64 percent from July 1,” league spokesman, Michia Moncho, stated.
“SPM residents are paying more for electricity in comparison with residents of other municipalities in the same category.”
Moncho explained that Nersa approved the price hike for the guideline municipal tariffs and if municipalities wanted to charge a higher increase than stipulated, they needed to apply for special permission. “The SPM, in terms of its budget proposals, has approved a
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7.64 percent increase.”
He added further that Section 229 of the Constitution empowered municipalities to apply surcharges, which refers to a charge in excess of the municipal tariff that a municipality may impose on fees for a municipal service provided.
“In contrast to revenue from a tariff, which should be reinvested in the sector from which it originates, revenue earned from surcharges is viewed as general revenue, and can thus be reinvested more broadly within a municipality. This means municipalities purchase bulk electricity at a given price and then resell electricity (at a higher tariff) to end users.”
According to Moncho, residents in the SPM were not informed about the decision of the council to endorse the 7.64 percent.
“The provision of electricity is a significant source of revenue (electricity tariffs represent approximately a third of total municipal revenue) and a major expenditure item for municipalities.
“Research has shown that this revenue generation by municipalities through electricity, which is a basic right, is used by municipalities to maximise surplus gains which cross-subsidises other remittances, which contradicts the val- ues of electricity being a fundamental right,” Moncho stated.
“This is, in itself a source of problems which will inevitably unfold now that Nersa has granted SPM the sky-rocketing electricity tariff increases. The root of unreasonable permission by Nersa to SPM’s application for sky-rocketing electricity tariff increases is a retrogressive one which doesn’t favour the poor, but rather the private sector, competition and commercialisation of such a basic service.
“This 7.64 increase will lead to an increase in the cost of living and production. It will therefore perpetuate poverty and worsen the persisting challenges of unemployment by igniting retrenchments.”
Moncho added that the YCLSA in the Province would engage its allies and the masses for the government and all municipalities, not only SPM, to rectify the situation.
The Sol Plaatje Municipality said in response that as it was responsible for the distribution of electricity within its jurisdiction (with the exception of Ritchie which is currently being supplied by Eskom) it needed to ensure that the infrastructure was in a state of ensuring continued and reliable service.
“As such, asset renewal, upgrade and normal maintenance must be done.”
Municipal spokesman, Sello Matsie, explained that the process of tariff setting was guided by national treasury and tariff increases for electricity were overseen by Nersa.
“Nersa publishes guidelines for minimum tariff increases after having considered various factors such as the cost of generation and transmission as applied for by Eskom and once the determination is made, tariff increases for retailers are determined.”
He added that for all the years, the municipality had implemented the Nersa-approved tariff, and the percentage increase had always been equivalent or below the recommended increases.
“The same has applied in 2016/17. Nersa has approved a minimum percentage increase in tariffs of 7.64 percent and the municipality has applied to increase its tariffs by a tariff below this minimum of 7.5 percent.”
Matsie explained that the reasons for the lower than recommended tariff included: the salary increases of staff in the electricity sector is within the estimated increase of inflation plus 1 percent for 2016/17; no new positions have been budgeted for; the loan repayments have stabilised and the mu- nicipality’s loan agreements are based of fixed interest rate for the duration of the loan; maintenance costs are being managed and cost effective measures are being put in place; strategies to reduce electricity losses are starting to pay off, and technical losses are within the industry benchmark of 6 percent; electricity revenue recovery is improving as a result of the meter replacement project, and improvements in the billing. Smart metering has been introduced for large power users and the municipality is now ready to integrate the system with billing; all residential customers are on prepaid meters with few that are still in the process of being fitted with a prepaid meter at the cost of the municipality and all indigent households have a prepaid meter box, which allows them to claim their free basic electricity per month.
“National Treasury also has an obligation to review the budget assumptions and ensure that there is sense in the process, and on this, the budget which includes tariff and related policies were evaluated and it was confirmed that the tabled budget is credible, relevant and funded, which are the three criteria which all municipal budgets must comply with.”