Cape Town Mayor Geordin Hill-Lewis has defended higher electricity tariffs for metro customers, saying the City spent a third of its budget on power utility Eskom.
Hill-Lewis made the remarks during a Council sitting on Thursday, where questions were raised about the City imposing a 17.6% tariff as opposed to the 15.1% approved by the National Energy Regulator of SA (Nersa).
The City is one of six municipalities that have refused to comply with the 15.1% increase threshold.
“Nersa approved an 18.6% increase for Eskom, which means that every Eskom customer in the country, including the City of Cape Town, as a customer, just like any other has to pay that increase.
“If you do the sums 18.6% on a billion rand a month is R186 million a month in additional costs that we have to pay Eskom just to buy the same amount of electricity.
“Now, if we had to absorb a large portion of that increase, and not pass it on to the customers to whom we were articulate, we would be on a one-way track to bankruptcy very, very quickly.
“In fact, we have shown that just the 2% difference between what Nersa has stipulated and what our Council has decided on equates to a R500m gaping hole in our City budget,” he said.
He said the decision by Nersa “doesn’t take into account” the other costs that have to be covered by municipalities including cross subsidising discounted electricity.
“We also look after 300 000 street lights in our City. We replace cables when they are stolen. We provide the electricity for them. We provide all the teams and equipment and trucks to care for them.
We also have to deal with an enormous amount of cable theft yearly, on some bad weeks R500 000 a week that we are spending replacing cables in our City.
“Now, Nersa does not take into account any of those costs. They make a blanket one-size-fits-all ruling on what the increase is,” he said.
Civil society group, Stop COCT said they were “disappointed” that the City was not prepared to “budge an inch” on the 17.6% increase, and instead wanted to head to court to defend its policy.
Group founder, Sandra Dickson said the mayor “cannot look at the 18.6% tariff increase municipalities receive from Eskom and apply it”.
“The City’s costs for electricity have two components, 60% bulk electricity purchases directly affected by the Eskom increase and 40% for salaries and overheads that increase in line with inflation.
“Therefore bulk electricity purchases, which is 60% of the City’s costs increases by Eskom is 18.6%.
“The remaining 40%, which is salaries and overheads should be linked to the inflation rate of around 7%.
“Averaging the above, one will get to Nersa’s 15.1% increase.
“Most other municipalities adhered to this, but the City chose to ignore the regulator.
“The 15.1% was announced in April. It was finalised in June which is before July 1 when the budget took effect, the City chose to ignore input from the public and exceeded by 2.5%.
“Incidentally, the cost of 6 cents per unit for street lights is already included in the unregulated portion of our tariff,” she said.