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Here's how electricity costs may increase in SA's biggest metros

Apr 17 2019 08:29
Ferial Haffajee

While the national electricity regulator, NERSA, has allowed Eskom a tariff hike of just over 14%, SA's three biggest cities are absorbing some of this price increase to pass on lower tariff hikes to beleaguered residents.

Municipal charges go up on July 1 and Durban, Johannesburg and Cape Town have tabled draft increases for comment. 

Cape Town has proposed hiking electricity costs by 8.88% in what it calls a "controlled increase" – this means the city is subsidising power as it will pay 15.63% more for bulk electricity from Eskom. 

Johannesburg residents, meanwhile, will pay 12.2% more for electricity from July 1. Durban’s electricity tariffs are set to increase by 14.4%.  

The SA Reserve Bank, in its March Monetary Policy Committee statement, said that higher electricity prices, together with rising food and fuel costs, were expected to lift inflation over the medium term.  

"However, this is expected to be offset by lower core inflation as unit labour costs and inflation expectations moderate," it said.  

Target range

The central bank still expects headline inflation to fall between its target range of between 3% and 6% up to 2021, with projected average increases of 4.8% this year, 5.3% in 2020 and 4.7% in 2021.

Durban’s deputy mayor Fawzia Peer said, "Tariff increases are a result of repairs and maintenance of infrastructure, the cost of addressing service delivery backlogs (and) the bulk purchases of water and electricity." She cited other causes too.

Peer said that all increases in bulk tariffs had been above inflation, which was why the city was passing on the highest increases to its residents. 

"The under-performing national economic situation and failures from state institutions such as Eskom does not only impact on the attitudes of South Africans in general and on our residents in particular; it also places additional financial pressure on households and the City," said Cape Town’s deputy Ian Neilson at the end of March. 

Cape Town and the Western Cape, which are both governed by the DA, want to be able to buy electricity from a range of suppliers, but this requires legislative changes. 

Durban’s eThekwini Municipality has a consolidated budget of R50.8bn for 2019/20, while Cape Town has a proposed budget of R49bn and Johannesburg R66bn. Electricity revenue makes up a substantial part of metropolitan budgets. In Johannesburg, electricity revenue comprises 30.5% of the city budget.  

Going up

Property rates increases in Durban are likely to be the highest of the three cities at 6.9%. Cape Town has stepped rates increases dependent on property value, while Johannesburg property rates are proposed to go up by 5.5%.  

Water prices in Durban are going up by 15% for residents and 15.5% for businesses; in Cape Town they are set increase by 9%, and in Johannesburg by 9.9%. 

Refuse removal costs will also cost more. To get your rubbish picked up in Durban, you will pay 9.9% more if the budget is passed. Cape Town has proposed to decrease its refuse removal rates increase to 5% from last year’s 5.7%, while in Johannesburg has proposed an increase of 7%.

If you have a pre-paid meter, there will also be additional agency charges made by vendors who run the system. There are 4.3 million households with pre-paid meters in South Africa, making it a substantial market for private sector providers and a substantial additional cost for residents. 

At the end of March, SARB governor Lesetja Kganyago said, "The assumption for electricity price inflation, which takes into account municipal price adjustments, has increased from 12% to 13% for 2019/20 and from 6% to 9% in 2020/21. 

"Higher food, fuel and electricity prices are expected to lift inflation over the medium term. However, this is expected to be offset by lower core inflation as unit labour costs and inflation expectations moderate."

Consumers will also face additional petrol price increases this month, suggesting a tough year ahead for this already strained sector. 

* The headline of this article was changed at 10:10 on Wednesday, April 17, to 'Here's how electricity costs may increase in SA's biggest metros' from 'Here's how much electricity actually costs you in SA's biggest cities'. 

nersa  |  eskom  |  electricity tariff hikes


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