The 17.6% electricity tariff imposed by the City of Cape Town for the 2023/24 financial year is unlawful, according to the National Electricity Regulator of South Africa (Nersa).
Also read: Here’s how much more you’re paying for electricity with new tariff increase
The regulatory authority responded to questions sent by News24 about the ongoing dispute over the electricity tariff, which is currently enforced by the municipality. News24 reports that the new tariff also contravenes the distribution licence provided by Nersa.
Nersa rejected the City’s application for an above-guideline electricity tariff increase of 17.6% earlier this year, saying that the City should rather enforce a 15.1% tariff increase on 1 July 2023.
However, the City applied to the High Court to have the 15.1% tariff increase proposal reviewed. It is expected that Nersa will oppose this, as no licensee, including a municipality, can enforce an electricity tariff that has not been approved by the energy regulator, as per the Energy Regulation Act.
Nersa granted Eskom an 18.65% tariff increase in April.
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Charles Hlebela, a spokesperson for Nersa, says the City of Cape Town applied for an above-guideline electricity tariff hike due to loadshedding, citing declining electricity sales due to energy efficiency and the increase in residents using self-generation methods, such as Small Scale Embedded Generations (SSEGs).
‘The loss of sales due to load shedding is outside of the customer’s control, and it is not of their making. The customers owning the self-generation facilities still pay for the cost of being connected to the grid through applicable network charges. They are not exempted.
‘[The] current pricing framework does not provide for a clawback mechanism for municipalities due to sales revenue losses.’
Hlebela adds that the court procedure only suspends the 15.1% electricity tariff guideline if an interdict is sought, noting that many customers will suffer due to increased electricity prices in the meantime.
‘It is in this regard that we impress on the city to implement the Nersa-approved [15.1% electricity] tariff whilst proceeding with its judicial review application,” he said, warning that the energy regulator may “take the matter further if the city does not cooperate.’
The City of Cape Town has described the 15.1% tariff increase as ‘unsustainable and irrational,’ citing that it could lead to an R500 million budget deficit for the municipality. The City further stresses that the proposed tariff by Nersa would hamper their efforts to reduce loadshedding resulting from Eskom’s 18.5% tariff hike, thereby hindering service delivery.
The City asserts that the 17.6% tariff hike is in line with its costs and supply calculation to make sure that the cost of electricity can cover the expenses associated with providing electricity, investment in infrastructure, and the goal of ending loadshedding.
According to the City, 70% of the money derived from the tariff increase will be used ‘to buy bulk electricity from Eskom, with the remainder for (…) reliable services and investments to end load shedding and buy more affordable power on the open market.’
It also states that Nersa informed the municipality of its decision on the tariff increase too late in the financial year to adjust municipal budgets that had already been approved by the National Treasury and City Council.
‘Nersa formally informed the city of its decision on the city’s 2023/24 tariff application on 30 June. It became practically impossible for the city to seek relief from the courts before the start of the municipal financial year on 1 July. The Municipal Finance Management Act does not provide for [the] amendment of tariffs once approved.’
Furthermore, the City says Nersa was unlawful in its decision-making and did not consider the electricity cost and supply information the City provided to apply for above-guideline tariff increases from 2022/23 and 2023/24.
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Residents have until 5 May to comment on the City’s rates and tariff budget
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