Electricity: Municipalities coining it

2012-11-02 15:46

Cape Town - Municipalities make too much money from electricity sales which could have dire consequences for industry, national electricity regulator Nersa warned on Friday.

Nersa regulatory specialist Charles Geldard said national treasury had been informed that the practice of cross subsidisation from electricity sales had reached a tipping point.

He told parliament's trade and industry portfolio committee that municipalities procured around 60% of their funding from electricity distribution.

The result was prohibitive energy tariffs imposed on industry and a high risk of business closures and job losses.

"In my personal view that is where the problems are lying in terms of industrial tariffs. The issue is that approximately 60% of the municipal budget is funded by electricity revenue," he said.

"National treasury staff have also been made aware that municipal funding from electricity is reaching a tipping point and needs to be reduced. We can't just continue to increase the amounts they are getting.

"It seems to us that they see industry as a source of revenue and don't understand the impact on industry... there is concern that this will force industries to close down."

Geldard said the regulator was addressing the issue with municipalities that were charging excessive rates and working towards tariff standardisation.

However, he said, the situation could not be remedied overnight.

The warning from Nersa came after the committee heard this week that certain major municipalities were adding mark-ups of several hundred percent to Eskom's megaflex tariff.

According to the Energy Intensive Users Group of Southern Africa, the figure was 692% in the City of Tshwane in the past financial year, and 548% in Nelson Mandela Bay Municipality.

Trade and industry acting director general Garth Strachan said such high electricity costs posed a clear threat to the manufacturing sector.

Nersa is currently considering Eskom's application for tariff increases of 16% a year for the next five years, which the utility says is needed to make its prices cost-reflective.

It is not the first time this year that the regulator voiced its frustration with the way municipalities conduct their role as electricity distributors.

In July, it said municipal mismanagement was bedevilling distribution and funds allocated for maintaining ailing distribution infrastructure were often spent elsewhere.

Nersa's Thembani Bukula cautioned that ringfencing funds was not necessarily effective and that the sanctions the regulator could impose on errant municipalities, including revoking their distribution licences, were firstly not a fast cure, and secondly not always realistic.

According to figures from the energy department, municipalities provide electricity to roughly 54% of the country's users and had an asset maintenance backlog of R27.4bn in 2008.

The portfolio committee this week heard repeated warnings that escalating energy prices could have dire consequences for the economy. If Nersa were to approve Eskom's application, the price of electricity would more than double by 2018.

Several MPs on Friday queried the utility's argument that it needed higher revenue to enable it to continue borrowing money for its build programme, pointing to its improved cash flow and captive consumer market.

But Eskom corporate counsel Mohamed Adam said the company's credit metrics were weak, and likened the revenue stream from cost-reflective tariffs to the salary a home buyer needed to earn to qualify for a bond.

  • mc.segal.5 - 2012-11-02 16:14

    Even if I use NO electricity At all I still have to pay Service Charge R250- Demand side levy 20.00 and Network charge 65.00 No electricity used yet...

      mc.segal.5 - 2012-11-02 16:15

      are we being ripped off??

      vernon.samuel.7 - 2012-11-02 16:30

      Being ripped off? Not at all! We are willingly paying for such necessities as kissing festivals, presidential jets, homesteads with bunkers, blue-light brigade civil claims, ministerial houses, ministerial top-range motor vehicles, government traffic fines, charter flights, 5-star hotel fees, etc. All done in a very open and transparent manner, of course.

      louis.olivier.988 - 2012-11-02 17:26

      Soon people very soon there is going to be a tax and rate payer’s revolt. Will Zuma then send out the police to shoot us? I have noticed over the last couple of years that tax and rate payers are / have become more militant in their attitude toward this corrupt thieving government and it parasites like EkDom. The next step is action and total defiance , that is when the crooks(government) react with draconian measures and people start getting shot and arrested and disappear, and then civil war to end it with a bit of genocide and sanctions by foreign governments

      frank.vankaapstad - 2012-11-02 21:31

      The fact that municipalities are layering thicker and thicker margins onto electricity isn't all that surprising. People don't pay their rates and taxes on properties and recovering that money is difficult. If they stop paying for their electricity, however, the municipality can simply cut off their power and this encourages speedy payment. Municipalities are substituting electricity for rates and taxes because it is more collectable and controllable. The consequence of this is obviously that high users of electricity end up paying disproportionally more for their power, in effect subsidising the rates and taxes for those that don't pay theirs. Not only is this unfair, but bad for business. Of course we wouldn't be in this situation if municipalities were not so poorly managed, corrupt and wasteful. "Our" ANC led Government is pretending to do something about this, but clearly not much is changing. My suggestion would be that Government set up a fully independent crack audit squad of high calibre individuals. This team should randomly go from municipality to municipality and audit everything from tenders to expenses. Where there are discrepancies, wastage or corruption the guilty should be fired or locked up. Municipal office workers need to shudder when this gestapo audit squad arrives. The only way to make people perform is for there to be serious consequences for nonperformance.

      charlesbronson.bronson - 2012-11-03 09:48

      cANCer thief's all of them!!!!!!

  • abu.muhammad.581 - 2012-11-02 16:16

    Sir First time atlease some one commenting on Municipality conning us,I'm from Emfuleni/Sedibeng Municipality,our tarrifs went up 60% from June into higher season,I asked to justify but no one have explained to me till today. Wellcome other readers to comment and there need to be some action to protect our business. Disgruntled citizen Suleman

      arthur.salvado - 2012-11-03 08:45

      Conning ? Guys please get it right. THEFT.

  • ian.d.samson - 2012-11-02 16:16

    More fraud, more corruption, more of our money being wasted by this marxist-scum regime. It's time to organise and strike!

      ekke.oupa - 2012-11-02 17:49

      The more fraud, the more corruption, the more money being wasted, the more tax in whatever form we pay. Unacceptable

  • hilda.macarthur - 2012-11-02 16:23

    I've told people this so many times I've lost count. I get my electricity directly from Eskom, and just about everyone else I know get their electricity from their respective municipalities. My monthly bill is most of the time a third or less of theirs. My bill last month was just over R600 and this is for a 3-bedroom, 2-bathroom cluster home with a pool. Yes, I switch of everything and pull out plugs in the mornings, but so do my parents, and their City of Tswane bill is still that much higher than mine.

      colin.dovey - 2012-11-02 16:33

      Yes @Hilda you are correct - in Johannesburg we pay R1700 for a 3-Bedroom, 1-bathroom, NO pool. Geyser switched off most of the day. No Heaters, 3 people. Bloody disgrace. What we are going to do when the 16% escalations kick in...who knows?

      Nitin - 2012-11-02 16:34

      And how xactly do u get it directly frum eskom and bypass municipality Hilda?

      terrylee.heuer - 2012-11-02 16:55

      Yes how do you get your electricity directly from Eskom Hilda?

      DuToitCoetzee - 2012-11-02 17:03

      She must stay on the outskirt of a city where only Eskom provide.

  • mark.a.fysh - 2012-11-02 16:26

    I see Tshwane Municipality seems to be highest in terms of it's mark-up on electricity. It also has one of the worst records in terms of black-outs and time elapsed to restore power. Their Mayville depot, which seves us is a mess. Ask me, our Company (which pays about R70 000 a month for power) suffers every week from lengthy outages; the whole night again a few days ago. Report as much as you like - if they don't feel like it they let it stand over to the next day.

      brett.sutherland.5 - 2012-11-03 13:38

      Will it be difficult for your company to produce your own electricity through renewable energy (solar, wind, etc). Seeing that your company spends so much every month it would be logical to stop relying on the government (municipalities).

  • charl.malan.12 - 2012-11-02 16:31

    Come everyone, come enjoy the public rape by government on all users of all departments, its magnificent!!

  • terrylee.heuer - 2012-11-02 16:32

    Municipalities are stealing us blind!!! From what I understand from news reports Pretoria must go onto prepaid from Jan next year but consumer has to pay R1500 for the installation another flippin rip off!!!! I be it will be an administrative nightmare for them to handle anyway cause they can't even bill properly!!!

      Erna - 2012-11-02 16:53

      Read in the local Record that tshwane metro is paying for the meters, so don't hold your breath. They first have to steal some more money from us before they have enough!

  • emile.butler - 2012-11-02 16:34

    The Drakenstein Municipality has added a daily levy fee for all pre-paid electricity users, which is forcing us to now buy electriciy on a weekly basis. If not and you buy electricity on a monthly basis, your daily levy is so freakin high that you don't get the electricity units for the amound you are spending. Sies on your Drakenstein Munisipality and Sies on you DA for allowing this!

  • Berto En Petra Mostert - 2012-11-02 16:43

    I followed the debate in the parlementary committee and was surprised to hear that Nelson Mandela municipality sold electricity to the ratepayer for a profit of R900 million rand - now that is ridicilous! Why must money be made whilst the electricity price goes up and up all the time! they're killing us!

  • ashleigh.ronaldon - 2012-11-02 16:47

    the one test for me is when no one buys an etag to show we will not pay for etolls and it collapses. once this happens we will be stronger and really take on this useless government

  • archimedes.syracuse - 2012-11-02 17:10

    feeling for you all. my monthly bill total to about R95.00 thanks to Solar geyser and gas stove. of cause I live in SA!

      lacrimose.wolf - 2012-11-02 19:27

      Yep, having switched to solar and gas my monthly bill is R110

      horst.muller.7330 - 2012-11-02 20:36

      and how much do you pay for gas a month?

  • JamesMWood - 2012-11-02 18:32

    At our house, 3 bedroom 2 bathroom and pool, our electricity bill normally around R400, most of which is service charges. Actual usage less than R100 because geyser only on 1 hour per day and same for the pool. How must we save more?

  • nompithizelo.mapingana - 2012-11-02 19:23

    I really hate to think about how we are robbed by the municipalities & ESKOM because of their bonuses.

  • charl.odonovan - 2012-11-02 20:04

    Municipalities need to be unbundled. They must be removed from the supply chain w.r.t the supply of electricity. They add no value and support systems are non-existent. They burden industry and frustrate business.

      mark.a.fysh - 2012-11-02 21:24

      I agree, Charl, but it won't happen while half the population don't pay, nevermind the municipal incompetence and etc etc.

      charl.odonovan - 2012-11-03 01:21

      Yes Mark that's a big problem. On Friday they proved(without a doubt) that industry is subsidizing those who can't afford electricity.Now we have business subsidizing the poor(who mostly don't have work). Then business can't afford the hikes so they lay off more staff who in turn needs to be further subsidized. It's once again a well thought through ANC brainchild! We need a serious amount of pressure on municipalities to move out of the way. We do not need them any longer to supply us with a commodity they do not manufacture. They are overweight, inefficient ogres and they are stifling growth.

  • charl.odonovan - 2012-11-02 20:19

    After what we heard today in parliamentary discussions from large private industrial manufacturers, Eskom together with our incompetent, incapacitated municipalities will drive South Africa's manufacturing sector into the ground within the next couple of years.This is not speculation, they have done their homework well. We will have the most expensive electricity in the world, with some of the cheapest resources to generate it.

  • reagan.titus.5 - 2012-11-02 20:26

    OMG they're milking us dry wtf roof en plunder dan vra ons hkm kan die land se ekonomie nie groei nie!!!!!!!!!!!!!!!

  • ansie.fourie.940 - 2012-11-02 20:42

    Kyk hoe bevark Tswane Munisipaliteit ons

  • william.hall.12979 - 2012-11-03 00:57

    I have been wondering how long it could go on! Every time Eskom puts price up by 25%, municipality does the same and nobody cries foul... It must be the poor maths teaching in this country. Eskom increases should be diluted by the additional distribution levy of the municipality but this is not happening. Say for example eskom is 50c and municipality is 50c for net rate of R1, and nersa approves 16% for eskom, but this time the municipality kept their rate in cents the same, the end increase to consumer would only be 8% (Eskom goes to 58c and municipality still gets 50c, netting a rate of R1.08) The biggest other thing I worry about is why is there VAT on electricity?

      ian.d.samson - 2012-11-03 09:59

      Indeed why! Why is there VAT on "Demand Side Management Levy", "Service Charge", "Network Charge"? There is NO VALUE on any of these additional charges!

  • gail.hayesbean - 2012-11-03 12:07

    Ultimately ALL including govt will pay the price for the mistakes and inexperience and also greed and corruption of the current government. I do however see a silver lining to all this and that is that when the last bit of electricity coal etc is gone everyone will actually have to go back to doing things manually and many semi-educated unskilled people will actually have to figure out and take responsibility for their own daily lives and have less time to waste on dancing in the streets and destroying facilities just because they are unhappy and feel entitled to earn X amount. Perhaps then we will all look at each other with new eyes and see that if the basic skills are not taken care of then the more skilled tasks cannot happen and so on. Why do certain people deserve to have more than one palatial home with a lift in nogal when other don't even have a leakfree dwelling the size of the lift in said person's home? This is a chicken and egg situation basically. My electricity tariff in PLZ has remained the same for the past four or five years. I have learned to fill my petrol tank once a month and entertain myself at home. My phone bill was once about R1600 per month and is now down to R400 and no there are no fewer people in the house than before and I live quite well. We need to decide what is necessityfor survival and what is excess but nice to have and live accordingly. Before the Industrial and Technology revolution haves and have-nots existed becoz we're not all equal

      ike.jakson - 2012-11-04 17:01

      A brilliant comment from Gail.

  • theMichaelHawthorne - 2012-11-03 14:02

    Why do some people get their units at discounted rates???

  • ike.jakson - 2012-11-04 02:29

    Stealing from the Taxpayer would be an apt description.

  • mark.hay - 2012-11-04 11:00

    Is anyone aware of what the Umsunduzi Municipality (Pietermaritzburg) with respect to electricity charges on top of amps charges. Class action is needed to get the municipality to account for its actions.

  • leonard.rom.7 - 2012-11-05 10:15

    they are robbing us we should all file theft chargers at eskom

  • kappies.fourie - 2012-11-05 12:44

    I am the manager of an old age home in Pretoria and our electricity bill went up from R 108 000 a month to R 140 000. Most of our residents are state pensioners so we will never be able to pay these from the levies. Question : what now ? The elderly again being punished for being part of our apartheid past ?

  • asadpat - 2012-12-04 11:33

    Vernon Please you not funding such items, thats prob less that 1% of the Fiscal budget. You paying for the INFLATED prices your old boys club chargers our Government for tendering their services in Construction, Financial services, Engineering, and other limited skills they keep from sharing.

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