Home electricity bills may be even steeper

Forget about Eskom's 25 percent-a-year hike - a suburban home's electricity bill could easily increase way beyond that.

Yesterday, Nersa approved a 25 percent electricity price hike each year for the next three years for Eskom - effectively 95 percent in total.

This is for Eskom's direct customers - mainly industry and municipalities - and is effective from April 1.

Municipalities have until April 30 to apply to Nersa for approval for the increases they plan to charge their own customers from July 1.

But Nersa yesterday recommended that municipalities charge an extra 15 percent for 2010/11, then 16 percent for each of the next two years.

Although the suggested municipal increases sound lower than the approved increases to Eskom's direct customers, this is misleading because municipalities make a profit on electricity sales, so the municipal increases are calculated from a bigger basic charge.

For example, if Eskom charges a municipality R1 for a unit of electricity and increases the price by 25 percent, that makes a price of R1.25. But if that same municipality is already making a profit of 8 percent on that unit of electricity - an existing charge of R1.08 to its customer - then the municipality needs to charge only 16 percent more to cover the increased cost of paying Eskom.

Detailed breakdowns of the expected real costs were not available yesterday. Such costs are complicated by the numerous tariffs Eskom and municipalities use, and because municipal increases start three months later than Eskom's increases to them.

But The Star took the figures provided by Nersa for its suggested increases for municipal charges, and the current tariffs on City Power's website, and estimated bills for a Joburg household using 600 kilowatt hours (kWh) a month and for one using 2 000kWh.

These costs exclude the basic electricity service charge - currently about R' to R200 a month - and VAT.

Nersa wants the really punitive rates to kick in above 600kWh a month.

On current City of Joburg tariffs, 600kWh a month would cost about R286 and 2 000kWh about R970.

If the Nersa recommended rates are implemented, this could rise to about R405 for 600kWh and R1 665 for 2000kWh, increases of 42 and 72 percent respectively.

After the third annual increase, that 600kWh could cost R497 and the 2 000kWh R2 177. That means overall increases over three years of 74 and percent each.

The higher municipal charges on electricity are intended to cover the costs of delivering the service to customers - for the municipal electricity staff, network maintenance and upgrades.

During the municipal financial year that ended in June last year, the City of Joburg added 48 percent to the bill when it passed it on to consumers, Ekurhuleni 62 percent and Tshwane 65 percent.

But looking at the total cost to the municipalities of delivering electricity, those metros made much less profit. Bad debts left Joburg and Tshwane in the red.

Last year, the Ekurhuleni metro said it made 8 percent profit, within Nersa margins. The City of Joburg and its utility, City Power, have previously ignored requests to discuss pricing.

Unions and opposition parties were furious at the hikes, Eskom, the national and local government wouldn't comment, but the Chamber of Mines was glad it wasn't worse.

The SACP called it a "catastrophic betrayal of the poor", the Freedom Front Plus labelled it "scandalous", the Independent Democrats was "reeling from shock" and the DA said "every South African got poorer today".

Cosatu noted the increase "with anger" and threatened strikes and protests.

"Eskom is currently studying the full details of the determination and is in consultation with key stakeholders. We will make further comment on the determination and its specific implications," said acting Eskom chairman Mpho Makwana.

"The city will study the Nersa decision and consult widely with all stakeholders before it takes final decisions on how this will impact the City of Johannesburg and its residents," said the City of Joburg.

Energy Minister Dipuo Peters said the government respected Nersa's decision.

"It has become necessary to conclude the price path for the electricity industry in order to eliminate the uncertainty around the funding of the capital programme for the sector. This has become even more urgent, particularly given the fact that there are indications already that we are coming out of the recession."

The Chamber of Mines had recommended a 25 percent-a-year increase for the three years at the public hearings, and said it appreciated the decision as it would cause "much less damage" than Eskom's requested 35 percent increase a year.

The Star

Posted at 09:33AM Feb 25, 2010 by Editor in Residential  |  Comments[4]