Umgeni imposes drought levy

2016-09-14 09:51
Utility needs to make up for revenue lost as it restricts supply to consumers.

Utility needs to make up for revenue lost as it restricts supply to consumers. (File)

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Residents of a number of KwaZulu-Natal municipalities — including in Msunduzi — will most likely have to pay more for water to keep Umgeni Water afloat financially, while the drought tightens its grip on the province.

Umgeni Water confirmed on Tuesday that a drought levy was being imposed on municipalities it supplies with water, since the beginning of this month.

But the uMgungundlovu District Municipality said the matter is to be deliberated at their full council meeting, as the decision will have “financial repercussions for all stakeholders”.

Msunduzi Municipality would not be drawn on Tuesday on the implications for consumers just yet.

The levy has been introduced because the drought has forced Umgeni Water to supply less water to municipalities as it tries to maintain the level of dams. However, the reduced production also means that Umgeni water is earning less money. The levy is intended to make up for the utility’s loss of revenue.

Umgeni Water spokesperson Shami Harichunder said they had taken a “proactive stance” to manage the effects of reduced sales volumes as a result of the drought, and therefore a prudent cash flow management strategy had been adopted.

The levy for bulk potable water was approved by Water and Sanitation Minister Nomvula Mokonyane in July. It is uncertain what, if any, consultation preceded the approval.

Harichunder said the levy was based on water volumes and would result in an increased step tariff per kilolitre.

Msunduzi Water and Sanitation manager Brenden Sivparsad said they would formally respond to Umgeni Water and await a response. He would not comment until then.

The levy means that Msunduzi, which has had a 15% water restriction implemented since the drought was gazetted, will pay 95c more per kilolitre received.

Other municipalities that have had five percent, 10%, 20% and 30% restrictions would pay 35c, 64c, R1,31 and R1,84 extra per kilolitre respectively.

Msunduzi residents have already been charged 8,2% more for water this year, by the municipality.

“The principle that informed the introduction of the levy is the compelling need to conserve water, especially as the drought, described as one of the worst since the mid-1980s, tightens its grip on the province, including several parts of the Umgeni Water operational area,” Harichunder said on Tuesday.

He said the drought had resulted in Midmar Dam and Albert Falls Dam remaining consistently at below 50% and 30% respectively.

These dams supply all of the uMgungundlovu District, Pietermaritzburg and about 80% of eThekwini. Water restrictions were implemented to prevent the possible failure of these dams.

“The introduction of the drought bulk levy is an additional measure to manage the effects of the drought,” said Harichunder.

He said the levy was suggested by the Department of Water and Sanitation and unveiled in November last year at Umgeni Water’s tariff increase consultation with water services authorities.

At the time, the proposal met stiff opposition from municipalities.

Harichunder said the levy was meant to encourage “curtailment” of water use.

“This means a reduction in water use will make this resource more resilient to the drought and, in this way, extend assurance of supply,” he said.

Harichunder added that Umgeni Water wanted to create awareness that water was a “finite” resource.

Harichunder encouraged the sparing use of water and urged consumers to adopt water conservation methods in everyday activities.

PCB says levy is "outrageous"

The Pietermaritzburg Chamber of Business said it would “fiercely” oppose implementation of the levy, deeming it “completely outrageous”.

CEO Melanie Veness questioned the “substantive fairness” of such a levy.

She said she understood that Umgeni Water must limit supply to customers due to the drought. However, Umgeni would not realise the income it anticipated and therefore needed to recover the loss in the form of a levy.

“Businesses therefore have to do without enough water to run their processes (which is negatively impacting their bottom lines), and because they are not using their usual consumption (which ironically is not being supplied), they are to be penalised for this too. How is that reasonable?” she questioned.

Veness said businesses and other water consumers would bear the brunt of the levy.

She was not aware of any mechanisms that would allow municipalities to re-open tariff negotiations at this stage. “We are well into this financial year and tariffs have been finalised … but if the local authorities can’t pass this levy on in this financial year, they will certainly look to recover it in the next year, so regardless, in the end, consumers will pay,” Veness said.

Read more on:    umgeni water  |  pietermaritzburg  |  drought  |  water

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