Some metros want eye-watering rates, tariff hikes

eThekwini Metropolitan Municipality residents will face the sharpest tariff increases out of the country’s major metros if the city’s draft budget for 2023/24 is approved.

Tariff increases

In practical terms (rounded up), it wants electricity tariffs to increase by 22%, water by 15%, sewerage by 12% and property rates by 9% from 1 July.

Mayor Mxolisi Kaunda, tabling the draft budget, claimed that “the three biggest contributors to the increases are out of our hands, that is, the Eskom increase, Umgeni Water Board increase and salary increases”.

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This does not explain why its proposed electricity tariff increase of an average of 21.91% is 3.42% higher than Eskom’s 18.49% municipal hike.

Umgeni Water’s approved tariff increase for bulk water is around 13%. Its proposed residential property rate increase is nearly double that of Johannesburg, Nelson Mandela Bay and Ekurhuleni. But already, its rates are significantly higher than Joburg and Cape Town.

On a R1 million property, an eThekwini homeowner pays more than 100% more than one in Joburg and nearly 200% more than one in Cape Town.

Tshwane and Mangaung are excluded from this comparison as neither have tabled draft budgets for 2023/24. Tshwane, which has battled instability this year, is nearly two months late in tabling an adjustment budget for the current year. Only then can it focus on the draft budget for next year.

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Cape Town proposes a decrease in property rates

Notably, the City of Cape Town has proposed a 1.1% decrease in property rates. This is due to the new 2022 valuation roll that will come into effect in July.

By contrast, the City of Joburg wants a 5.3% jump in rates tariffs, together with the increase from the new valuation roll. In total this is 12% higher, which means rates will increase by around 17% on average.

Increases for specific properties will vary greatly. Assuming a ±10% increase in ‘most’ cases, this will translate into a 15% rise in actual rates paid. The City of Ekurhuleni did not increase rates last year as it implemented its new valuation roll in July 2021.

There are changes to how rates rebates are calculated in both Cape Town and Joburg.

Electricity price hikes are mostly in line with Eskom’s 18.49% increase approved by Nersa. However, the City of Cape Town has managed to shield its residents slightly. The City of Ekurhuleni had planned to increase residential electricity tariffs by 15% when it tabled its draft budget. This was prior to Nersa pronouncing on Eskom’s municipal tariffs.

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Municipalities to approach Nersa

Nersa, however, this month proposed that municipalities only increase electricity tariffs by 15.1% from July. In its model, bulk purchases from Eskom (which will increase by 18.49%) comprise around three quarters of the cost of supplying electricity.

Its final guidelines will likely be published in May. Municipalities must apply to the regulator for approval of their tariffs.

Under the current methodology, if the 15.1% guideline is approved, municipalities – including the major metros – will have to limit their increases to this amount, unless they have compelling reasons and a motivation to deviate.

This includes a cost of supply study which only four out of 176 municipalities have fully implemented. Nelson Mandela Bay is the only metro to have done so.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.

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