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31-07-2013: Joburg Electricity Tariffs Cushions the Hard Times

In line with alleviating the burden of residents in these difficult times, the City of Johannesburg (COJ) is announce and a seven percent electricity tariffs increase from July 1, 2013.

In April 2013, the National Energy Regulator (NERSA), issued a municipal guideline for a tariff increase. In line with the municipal guidelines and within the increases approved by the Mayoral Committee and City Council, City Power applied for a 7% tariff increase to NERSA). This was approved.

The NERSA approval was closer to the City’s request and further nautralised tariff increases in other categories. City Power’s submission intendedto minimisation cross subsidisation and aligning all the demand tariffs including the Time of Use (TOU)  and doing away with Conversion surcharge for TOU customers. Also to change the implementation of the Inclining Block tariff (IBT). The approval maintained the cross subsidisation and allowed for the change in the implementation of the IBT.

Public participation process is a legal process and the 2040 Joburg Growth and Development Strategy emphasises the importance of active and engaged citizenry. It is also in line with fulfilling these principles, that City Power chose to improve efficiencies to cushion the reduction of the cost of supplying power to residents.

Even though the City was not granted the tariff increase it applied for, based on individual tariff categories and the structural realignment that the City proposed on certain tariff categories, the utility City intends complying fully with the NERSA decision.

In line with the 2013/14 tariffs, the Demand Side Management (DSM) levy has been reduced from 2c/kWh to 1c/kWh to alleviate the burden on the customers. Accordingly, prepaid business customers are charged from 1kWh whilst prepaid domestic customers are charged only from above 500kWh.

The City accepts the approval from NERSA and will continue to engage with the regulatory body to ensure that future tariffs are rationalised and are more compliant with industry and regulatory benchmarks.

In its submission to NERSA, the City proposed to increase the TOU tariff to match the Demand tariff in order to allow a benefit to the customer, but this benefit would only accrue to the customer on condition that a customer moved load away from Peak (including standard) to Off-peak. To achieve this structural change the utility had applied for 15.4% and only 7% was approved.

With respect to the alignment with Eskom, the rationale is that City Power’s electricity purchases from Eskom are in excess of 90% of City Of Joburg’s energy needs. Therefore our tariffs in general as a distributor should be aligned with Eskom ratio of 26/74 (fixed vs. variable charges) in order to ensure that we pass these costs while we adequately provide for the requirement of maintaining the network to ensure sustainability in terms of continuity of supply.

With regards to cross subsidisation, the utilities submission intended to significantly reduce the business tariff contribution to cross subsidisation hence the proposed low tariff increase of 3.5% and NERSA approved an increase of 7%.

For the domestic pre-paid customer, the utility applied for only 0.39% increase (in its effort to encourage customers to migrate to prepaid) in order to maintain the low tariff on prepaid and encourage conversion to prepaid. However NERSA approved an increase of 0,39% in line with our submission in this category.

While we continue to reinforce good governance and encourage residents to pay for services they receive, we are also sensitive to levels of unemployment, affordability, production costs, access to services, and economic competitiveness of the City. These are considerations which inform the City’s tariff setting criteria and link with reality on the environment we operate within..

People of Johannesburg desire a city that is developmental in nature, spatially integrated, liveable, embraces inclusive economic growth and allowing for prosperity. 

Residents can all contribute to the national efforts to conserve electricity by limiting consumption during peak hours between five in the afternoon and nine in the evening; by switching of the geyser and unplugging appliances which are not in use; as well as through better insulation of their homes and through switching to energy-efficient light bulbs.

Together with our residents we need to continue our pursuit of freedom to live in a great city, remaking our city so that it is safe, open, unified and prosperous.