Msunduzi retains 3,08% hike

2017-06-09 13:45
New tariff in budget despite Nersa decision.

New tariff in budget despite Nersa decision. (File)

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Msunduzi Municipality could find itself in hot water if it ignores the national energy regulator’s decision to cap the electricity tariff.

The municipality last week approved the 2017/2018 budget and included a 3,08% increase as part of their budget for the electricity tariffs.

However, Nersa confirmed with The Witness earlier this week that they denied the municipality’s 1,2% tariff increase over and above the regulators recommended 1,88% increase.

The worst case scenario for the City if they ignore Nersa includes being in breach of their distribution licence and possible court action.

Msunduzi said they are waiting for a formal letter from the energy regulator denying the City’s proposed electricity tariff increase before they “deal with the issue”.

Spokesperson Thobeka Mafumbatha said they have not yet received the word from energy regulator Nersa, notifying them that the City’s proposed electricity tariff increase was not approved.

“We will deal with the matter accordingly once we receive a formal response from Nersa,” said Mafumbatha.

When asked if the City had a plan on how to approach the ailing electricity infrastructure if Nersa denied the tariff increase, Mafumbatha did not respond.

This throws a spanner in the works as the City also already printed their annual budget and mid-term revenue and expenditure books and distributed it among councillors and relevant stakeholders, citing 3,08% as the official electricity increase for the 2017/2018 financial year.

At the time, the municipality’s chief financial officer, Nelisiwe Ngcobo, had said the City received the nod from Nersa “in principle” but had no doubt the approval letter was on the way.

Energy expert Chris Yelland said “it seemed that the municipality may have jumped the gun”.

“There is quite a comprehensive Municipal Act that needs to be followed in gazetting a new tariff. Proper processes need to be followed and it sounds to me that the municipality may have jumped the gun and proceeded on their own wishful higher tariff,” Yelland said.

He said without a formal approval from Nersa, the municipality should not have budgeted for the increase and this now “lands the council in a spot of bother”.

He said the municipality should not ignore the regulator and should take this matter seriously. “This was the absolute wrong approach and it is now up to the municipality to make further presentations to Nersa to justify why they need that increase.

“If they go ahead and charge ratepayers and businesses on the increase they budgeted for without Nersa’s approval, they could find themselves in breach of their distribution licence and possibly in court,” Yelland said.

Chairperson for the Scottsville Residents and Ratepayers Association Peter Green said the City should have a “plan B” in place, and if not, “then they are just shooting themselves in the foot”.

He called for the municipality to re-establish their “credibility in their ability to produce a decent budget”.

“They [the municipality] need to stop spending money on fancy cars and over-paying security companies and use that money to upgrade infrastructure,” Green said.

During the budget review, the municipality said that the capital received from the extra 1,2% would go toward upgrading the city’s electricity infrastructure. Residents are now questioning whether the denial from Nersa means the city’s infrastructure will remain in a poor state.

“If they had no plan B then they [municipal managers] do not deserve to be in the positions they are in.

“I hope they have a plan to upgrade infrastructure without that extra on the tariff increase,” Green added.

Minnesh Parmanand from the Msunduzi Ratepayers Association said the municipality should not have “pre-empted” the tariff increase.

He also called for the City to reveal a detailed plan on how they plan to upgrade infrastructure.

“We may have not objected to the tariff increase if we could see for ourselves exactly where and how the money was going to be used, but the municipality has failed to show us that,” Parmanand said.

“We cannot agree to an increase where we have had no sight of the plan for the money.”

Energy expert Chris Yelland said Eskom this week submitted a proposal to the South African Local Government Association (Salga) and National Treasury for a 20% increase in tariffs to all Eskom customers in the next financial year.

The power utility also proposed a 27% increase for all municipalities. “This does not mean that Nersa will approve these figures but we can expect an increase that is close to the requested figure,” he said.

Read more on:    nersa  |  pietermaritzburg

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