A report by the South African Cities Network (SACN) on the state of city finances for 2018 has revealed that several major cities have seen a serious decline in revenue from power every time Eskom hikes prices.
This includes cities such as Joburg, Tshwane, Erkhuruleni, eThekwini, and Cape Town.
According to The Star, every time there is an increase in tariffs, each city’s payer base is reduced.
In the nine-year period between 2009 and 2018, Eskom’s prices increased three-fold at rates that are often above inflation figures and this forced a customer base that was already struggling to resort to theft, turn to alternative power sources, or become more energy efficient, thus reducing their usage and costs.
“This has had a direct impact on the revenue that cities get from electricity sales. A significant proportion of the decreases in electricity use comes from residential customers,” states the report.
Another knock on effect of this is that cities no longer have a revenue surplus from selling water and electricity to cross-subsidise other services.
“Surpluses are being squeezed because of the rapid increase in bulk tariff charged by Eskom and the water boards. Although cities have not passed on the full increases to consumers, tariffs have increased and have resulted in reduced consumption of electricity and water,” added SACN.
Another interesting part of the report was that it recommended that metros look into sourcing some of their power from independent power producers (IPPs).
The report’s final recommendation is that cities need to act fast to avoid the impending financial crisis that they believe will be caused by the knock-on effect of the increasing unaffordability of municipal bills that have increased at a higher rate than inflation since 2010.
“Cities could make their tariff structures less regressive through eliminating basic levies or monthly connection fees (especially to lower-income-households), having inclining block tariffs that increase progressively (especially for very high levels of consumption) and offering special service packages to indigents,” concluded the report.