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Rising municipal accounts to hit pockets

Jul 01 2012 15:18 Antoinette Slabbert

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Pretoria – Consumers will soon have to spend up to a fifth of their net income on municipal accounts.

So says Economists.co.za chief economist Mike Schüssler, warning that people need to take the rising cost of electricity, in particular, into account when undertaking long-term commitments.

Schüssler was reacting to information that Eskom wants to increase its selling price of electricity to 97.51c/kWh by 2016/17, compared with the current 50.27c.

In 2007/08 it was a mere 19.4c. The increase is being done to reflect the real cost of electricity provision.

These figures are presented in the group’s objectives for the next five years, which are contained in its annual report and against which the utility’s performance is measured.

Schüssler says this tariff is an average that includes cheap power provision to clients such as BHP Billiton’s smelters. Sake24 has for some time been embroiled in a court battle to get these tariffs disclosed. According to Schüssler the tariffs could be as low as 12c.

Municipalities buy wholesale electricity from Eskom at considerably higher rates and re-sell it to consumers for even more.

Every year the National Energy Regulator (Nersa) sets guidelines as to the percentage by which municipalities may raise their electricity tariffs. This week Nersa however provided Sake24 with the names of 33 local authorities that wished to exceed the guidelines.

Nersa recommended that municipal electricity tariffs may rise 11.03%, but the Gamagarra Council (Kathu) applied for a 23.83% increase and Midvaal in Gauteng for 25.04%.

Nersa says it takes into account whether the tariffs of the municipality concerned are currently below the acceptable level.

When a bigger increase is allowed the municipality has to isolate the electricity revenue and indicate the purpose for which it intends using the money.

It has to report on its expenditure to Nersa every six months and any money used differently is deducted from the next year’s tariff.

Nersa failed to respond to a request for particulars of cases where local authorities had been penalised in this manner.

If the tariff is relatively high and the council asks for an increase in excess of 11.03%, it has to attend public hearings to explain why. These hearings have already been finalised for this year and Nersa was to have decided by Friday regarding the relevant municipalities’ electricity tariffs for the new financial year, which are due to start on July 1. These decisions will be announced later.

Schüssler says because municipalities also demand their pound of flesh and are not necessarily modest, municipal accounts become an increasingly significant item in consumer budgets.

It's not only the electricity tariffs that are relevant, but also various levies and VAT.

He uses the example of an elderly couple in Johannesburg whose electricity consumption amounts to R542 but, because of additional levies and VAT, the final account is 59% higher.

The price of water is moreover also rising sharply and property rates generally increase by at least the inflation rate.

He says the municipal account already takes more than a tenth of a homeowner’s salary and with Eskom’s plans to double its tariffs this could soon become a fifth.

Schüssler says that, according to National Treasury's figures for the third quarter municipalities had a income of R286bn in the financial year to end-June. That’s almost 10% of the gross domestic product (GDP).

"Together with the rest of government's 30% we are heading for a situation where government income is 40% of GDP.”

This makes South Africa one of the countries in the world where government plays the major role in the economy.

*Eskom recently submitted its application for price increases for the next five years to National treasury and the SA Local Government Association (Salga).

Details will be published later and public hearings will follow. These prices will come into effect early next year.

Municipalities will then base their increases, which come into force every July, on those prices.

Acceptable tariffs for 2012/13 – c/kWh

0-50 kWh             51-350 kWh        351-600 kWh      More than 600 kWh

61-66                  77-82                 104-109                124-129

*Acceptable household municipal electricity tariffs according to Nersa.

 - Sake24

For more business news in Afrikaans, go to Sake24.com.

nersa  |  eskom  |  electricity tariffs
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