Joburg proposes surcharge for all prepaid City Power customers

The City of Johannesburg will attempt, for the third year in a row, to implement a contentious new monthly surcharge for all prepaid City Power customers.

Under then mayor Herman Mashaba, it quietly reversed the R200 charge for residential customers in early July 2019, once it had already been approved.

Last year, during the Covid-19 lockdown, the council once again tried to introduce the fee. It managed to only pass its budget well into the new financial year, a day before the deadline given to it by the Gauteng government.

In tariffs for 2021/2022 tabled in council in late March, the city proposes the R200 capacity charge for residential customers on prepaid, and a R400 charge for business prepaid customers.

It says these customers should “start making [an] appropriate contribution to the cost of operating and maintaining the City Power electricity distribution network to be available on demand”.

Aiming to ‘align’ customer types

The original plan was for these monthly charges to ratchet up over a three-year period to fix a broken tariff structure where postpaid customers are effectively subsidising those on prepaid. The city says “it is envisaged that the customer categories will fully align to respective comparative tariffs over a three-year tariff journey”.

Middle-income households on prepaid are going to face steep increases in the price of electricity, should these tariffs be approved. A customer using 450 kilowatts hour (kWh) per month will see a 44% increase in the price of prepaid electricity because of the double whammy of the steeper increase in the second block of tariffs, as well as the new fixed capacity charge.

For a prepaid customer using 700kWh per month, the increase is a more “muted” 32%.

The proposed tariffs seek a 14.59% increase for residential customers. This means the service charge for postpaid residential customers will be R169.29, while the monthly capacity charge will be at least R498.72 (for a single phase 60A connection).

Because of these sizeable monthly charges, City Power’s postpaid customers pay the most for electricity among the country’s major metros.

It says the “proposed increase to service and capacity charge is aimed at achieving greater balance between City Power’s revenue and cost structure by gradually increasing the contribution with a fixed income to more effectively compensate for the proportionally higher fixed cost structure of our operations”.

Consumption (per kilowatt hour) tariffs across the board will increase by this amount.

Exceptions

There are however three exceptions.

First, the increase to “conventional business customers’ energy charges (c/kWh)” will be limited to 10.19% “to gradually align to Nersa [national energy regulator] benchmark tariffs”.

Time of use tariffs for large power users (LPU) in the city will increase by 18.59% to “achieve greater alignment between this category and the LPU Demand category”.

And residential prepaid tariffs will increase by 15.59%. To achieve this without impacting poorer households, it proposes “to limit the increase to residential prepaid block 1 to 9.10% however the tariff applicable to block 2 should be increased by 18.1% to compensate for potential revenue loss to City Power while protecting the indigent customer consuming up to 350/kWh per month”.

Option for non-affluent areas

A further proposal seeks “to give [the] qualifying residential prepaid customer in non-affluent areas with no renewable energy installed except for solar water geysers, the option of a flat rate” of R200 per month “for the first 350kWh a month, provided installed circuit breaker capacity is limited 20A”.

While the “effective increase to municipalities and municipal entities over the Eskom financial year is … only 15.09%, … Nersa is yet to issue the FY21/22 draft municipal guideline increase for municipalities and municipal entities for implementation with effect from 1 July 2021”. CoJ says the “draft guideline increase is however likely to be 14.59%”.

Other proposed tariff increases are as follows:

• Property rates +2% for all categories,
• Water +6.8% for residential/business (this may change once Rand Water announces its new tariffs),
• Sewer +6.8%, and
• Waste management (Pikitup) +4.3%.

Recycling levy

The city will also be rolling out its separation-at-source recycling programme throughout Joburg.

This is already in place in many of the northern suburbs and requires households to separate waste into two bags – a traditional black bag and a separate clear bag with recyclable items which is not placed in the Pikitup bin. These are collected separately.

From July, it is proposed that: “Affluent households at various suburbs excluding those located in areas classified as township and informal settlements will be charged [an] additional levy at an amount of R50 per month for all properties with a market value above R350 000.”

The closing date for public comments is May 8. Further details are available on the city’s website.

This article first appeared on Moneyweb and has been republished with permission.