Tariff hike: so many questions

2013-11-08 00:00

THE recent messages and pronouncements coming out of council on the electricity increases in response to National Energy Regulator of South Africa’s (Nersa) rejection of Msunduzi Municipality’s application for a 10% increase on usage charges are confusing. On the one hand, a decrease on usage charges from 10% to seven percent suggests that electricity will be cheaper. On the other hand, an increase on the basic charges suggests that electricity will be more expensive. This article attempts to explore what is really going on with electricity charges in the city.

Electricity charges under Msunduzi Municipality include three components: a basic charge, an amperage or MCB charge, and a usage charge (per kWh of electricity use). Nersa rejected Msunduzi Municipality’s application for a 10% increase on usage charges. Msunduzi is only allowed to raise usage charges by seven percent. This means that instead of being charged R0,66 per kWh, domestic households on credit meters are only allowed to be charged R0,64 per kWh — a difference of two cents.

Poor and working class households typically use less than 500 kWh per month. If we calculate the per kWh charge at Nersa’s seven percent then we can see that households will be charged R10 less a month on their usage charges (500 kWh x 2 cents = R10).

On Tuesday, November 5, however, council passed increases on the basic charges for households. Basic charges are fixed and come into play before a light switch has been flicked on. Most poor and working class households live in small homes, have 20-30 amperage and use small volumes of electricity. These households fall within the “single phase up to 80 amp” category. Basic charges for these households will go up 54% or R9,50 — from R17,50 to R27. Wealthier households who live in big homes and use many appliances consume high volumes of electricity, 750 kWh+ per month. These households fall into the “three phase up to 100 amp” category and see their basic charges increased by 26,88% or R7,84 from R29,16 to R37.

What appears to be happening is that Msunduzi Municipality has simply moved revenue losses from the usage charge to revenue gains on the basic charge; thus ensuring no change in cash flow. This means that although Nersa rejected Msunduzi’s application for a 10% increase; the city simply recouped the losses via increases on the basic charges — Msunduzi still gets its 10%.

For example, the cost of an electricity bill (on a 30 amp for 500 kWh) before Msunduzi implements the changes directed by Nersa is R577,93; after the city has implemented its changes, the cost of the bill is R577,49. No change in municipal revenue.

There is something mildly disturbing about Msunduzi’s simply increasing the basic charge when the regulator rejects a municipal increase on the usage charge for being unaffordable. But the question we as the Pietermaritzburg Agency for Community Social Awareness (Pacsa) are most concerned about is who absorbs the electricity price hikes? The answer is the poor and working class households — households who use the least electricity and pay the highest “add on” increases.

At the new amended rate, basic charges and amperage charges now account for 44% of the electricity bill for poor and working class households or R256,44 of the total electricity bill of R577,49. Note that this figure excludes rates, water, sanitation and refuse that takes the typical poor and working class bill beyond R1 000 a month.

What might be perplexing to readers who have followed the debate is why if Nersa rejected Msunduzi Municipality’s application for a 10% increase because of affordability concerns; would it provide the space for basic charges to be increased? The answer may lie in what the municipality subjects to Nersa for scrutiny. Only the basic charges and usage charges appear to be shared with Nersa; the amperage charges appear to be hidden.

Nersa’s recommendations thus appear to be made in the absence of all the components making up the total electricity charges. It is highly unlikely that Nersa would provide the space for increases on the basic charges if it knew, for example, that Msunduzi charges households an additional tax (wholly absent from other municipalities) of R7,648 per amp. With most poor households having a 30 amp connection — the amperage charge of R229,44 is substantial.

Why, if the municipality wants to recoup the loss of three percent, does it not target high consuming residential households and big industry? Why must low-volume consumers absorb the cost of overconsumption by the rich and profits of industries? Why did it increase the basic charges for the smallest of city businesses by 1317% (R661,35) but leaves big business and industries at just 5,5% (R369,17)?

Why, if the city says it represents poor and working class households, do its tariffs reflect the interests of the wealthy, the elite, big business? Why does it defy national policy and not provide poor households on prepaid meters with free basic electricity? Why are the tariff differences between prepaid and credit meter households not rationalised (R1,08 vs R0,64)? Why are increasing block tariffs (like most other municipalities in KZN) not implemented to ensure that poor and low-volume consumers access affordable electricity? Why are amperage charges not removed off the bills of poor households? Why are basic charges not instituted only after volumes over 500 kWh have been consumed? Why are amperage charges not subjected to the scrutiny of Nersa? Why does Msunduzi Municipality simply increase its basic charges to recoup “revenue losses” after Nersa, with its advocacy mandate to “represent the side of consumers during the tariff determination, especially the voiceless consumers,” has rejected its application?

• Julie Smith is head of research and advocacy at Pacsa, Pietermaritzburg Agency for Community Social Action.

Pacsa is an independent, faith-based, non-governmental organisation that has worked to achieve social and economic justice for over 30 years. Pacsa works for improved social cohesion as poverty is reduced in communities in the uMgungundlovu District in KwaZulu-Natal, South Africa. It facilitates development processes with local community partner organisations as they seek substantial change in their communities, and accompanies them over a period of time, as requested by them.

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