Eskom monopoly blamed for high tariff increases

Municipal tariffs are gobbling up an increasing portion of household income in South Africa, with especially electricity becoming almost unaffordable, says economist Mike Schussler.

According to data from the Johannesburg Property Owners and Managers Association (JPOMA), its council bill represented 14.05% of tenants’ household expenses in 2009-10. Now it is almost 24%.

The biggest increase (224%) over this period was in electricity tariffs, while salaries increased by 91% and rent by only 80%.

JPOMA’s members together provide over 40 000 affordable housing units, accommodating about 200 000 tenants, according to information on its website.

The struggle to pay for electricity is however not limited to these households.

Using the tariffs approved by electricity regulator Nersa, Eric Bott, electricity expert from Energy Management Consulting, had a look at the total monthly electricity bill of different households in the metro councils and when buying directly from Eskom.

Schussler compared this with BankservAfrica data on salary and pension payments into the bank accounts of consumers as a basis for his comments.

He says electricity costs amount to almost 13% of the average take-home salary in the formal sector.

In the informal sector income is lower and affordability is therefore an even bigger problem.

Schussler says electricity costs represent 27.6% of the median private pensioner’s net income.

“Many people can simply no longer afford it,” he adds.

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Really poor households often get some sort of assistance from their municipalities or other parts of government, but the middle class is mostly on its own. Notably, small consumers in Ekurhuleni enjoy the lowest tariffs, which are probably subsidised by middle-class households, as the following data shows.

The cost for middle-class urban households exceeds R2 000 in every metro, with those in a few municipalities paying less that Eskom charges its direct customers.

Residents of Cape Town have been protesting high electricity tariffs under the banner of the organisation Stop City of Cape Town.

In response, the city first issued a statement to bust “myths” being spread in this regard, then mayor Dan Plato issued a statement blaming the Eskom monopoly for high tariff increases that are being forced on council.

Plato indicated that the current steps towards a liberalised electricity supply industry could enable the city to buy from other generators at lower tariffs.

He also emphasised that his council absorbed the Eskom increase to some extent and limited its tariff increase in July to 13.48%, while most other municipalities implemented a 14.59% increase in line with the Nersa municipal guideline.

Bott says electricity tariffs are too complicated for the lay person to understand and this makes it difficult to check bills and make comparisons.

A part from inclining block tariffs where the extent of the blocks is not standardised among different municipalities, some distributors apply seasonal tariffs.

Commentators have also criticised the lack of transparency in the nature and extent of cross-subsidisation among different user groups in a single municipality.

Bott says tariffs could be lower if municipalities and Eskom operated more efficiently. City Power in Johannesburg, for example, loses almost 30% of its electricity mostly due to theft and paying customers have to compensate for those losses by paying higher tariffs.

Morne Mostert, head of local government affairs at AfriForum, says the cost of electricity is shockingly high as Eskom’s steep increases impact end users.

This, he says, increasingly drives consumers to alternative sources of energy.

For smaller households it is however difficult to find cost-effective solutions.