Joburg’s new prepaid levy will see electricity costs almost double

The city of Johannesburg has once again proposed a prepaid levy which, if implemented, could mean that consumers pay almost double for electricity.

This is the third year that the city is trying to add this levy to a system that was initially designed to assist lower-income households and small businesses.

Civil activist organisation Outa has submitted a formal objection to the city about the proposal in its draft budget for 2021-22 to add a fixed monthly service charge of R230 to domestic and R460 to business prepaid bills.

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This levy means the cost of buying 350kWh of electricity a month for a household will increase from R596.17 to R913.00, an increase of 53%. Without the levy households will already pay 15% more at R683.00 due to the power charge increase.

With the levy, the cost 500kWh a month will increase from R791.53 to R1 248.78, an increase of 58%. Without the levy it will still rise R1 018.79, an increase of 29% at a time when the economic situation facing residents is extremely difficult, particularly after the pandemic lockdowns.

“These charges are unreasonable and unjustifiable, particularly in the lower blocks,” says Brendan Slade, Outa manager for legal projects.

Outa wants the city to do a cost-of-supply study to motivate the need for the levy. “In the absence of such a study, we regard this charge as irrational and call for it to be reconsidered,” Slade says.

According to Outa, the city’s draft budget documents are contradictory because the levy is included in two sets of tariff documents, but not in the tariffs in the main budget book, creating the impression the city wants to levy this new charge without proper public oversight.

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The organisation says there is also no way for the public to establish what City Power spends per kWh to provide its electricity service, as these costs are not available. There is also no indication that the revenue from the levy will be ring-fenced for clearly identified expenses.

“The lack of transparency suggests the city has an opportunistic approach to improve revenue to compensate for its declining financial situation,” Slade says.

The budget documents also fail to explain how this monthly charge would be levied on a prepaid bill and whether it would have to be paid up front before you can buy electricity. This could lead to a situation in which households will not have enough money to buy electricity after paying the levy.

Outa says it has noticed the city is moving towards more surcharges on bills, which means consumers will be less able to control their costs by using less services, which puts them in a difficult situation.

In addition, Outa believes the city should try harder to cuts costs, such as reducing electricity losses. The city’s budget does not indicate how much of the bulk electricity it buys from Eskom and Kelvin is lost, only that it hopes to reduce losses to 24%, well above the benchmark of 10% set by the National Energy Regulator (Nersa).

According to Outa it has been reported that the city plans to drop this proposed levy, but it has not seen any official confirmation. “It is the third year that the city has tried to add a monthly surcharge for prepaid electricity users. The previous attempts failed, as they should have. This attempt should fail too,” Slade says.