The electricity tariff hike of 13.5% took effect on July 1 and saw tariffs jump from R2.40 per unit to R2.73 for domestic users.
The electricity tariff hike of 13.5% took effect on July 1 and saw tariffs jump from R2.40 per unit to R2.73 for domestic users.

City of Cape Town may be taken to court over approach on electricity tariffs

By Nicola Daniels Time of article published Aug 5, 2021

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Cape Town - A class action against the City may be on the cards as civil society organisations rally to challenge the growing cost of service delivery which mirrors that of a “corporate business”, following continued outcry over high electricity tariffs that have left poor residents unable to keep up.

The electricity tariff hike of 13.5% took effect on July 1 and saw tariffs jump from R2.40 per unit to R2.73 for domestic users.

SA First Forum convenor Advocate Rod Solomons said: “We are in discussion with some civil society organisations to take the City to court. We are considering the class action because the City does not belong to any political party, they are there to be of service to the people.

“But the City keeps paying lip service to public participation, they do not have the interest of the citizens at heart, they think they are running a corporate business.

“They are a service delivery entity, they must deliver services in the most cost effective way, we have an unemployment rate of over 35%.

“Once again we need to run to the courts to ensure those elected to serve the people, do their work for the people.”

STOP CoCT founder Sandra Dickson said while the City blamed Eskom tariff for R2.73 price hike for domestic users in the 0 – 600-unit block, Eskom charges for the same category of users is R1.82 (incl. VAT) per unit.

“CoCT’s tariff is 50% higher than the Eskom tariff. Is blaming Eskom appropriate here? CoCT claims that they kept the tariff increase at 13.45% while Eskom charged them a 17.8% increase.

“By CoCT’s own statements, 65% of costs are bulk electricity purchases from Eskom which leaves 35% for maintenance and salary costs which should be linked to inflation and even lower as CoCT ’froze’ salary increases as per budget statement in May 2021. It is therefore an untruth that the 13.45% increase was ’kept low’ by CoCT,” said Dickson.

Mayco member for finance Ian Neilson said it was not possible for the City to provide the same pricing as Eskom as they were working with tight margins.

“Yes, Eskom’s residential tariffs are highly subsidised. It is impossible for the City with a 60% commercial and industrial sales base to provide the same level of subsidisation to residential customers as Eskom.

“Electricity provision is expensive. The City offers assistance in the form of rates and tariff relief and payment arrangements. It is the responsibility of customers to approach the City to apply for relief,” said Neilson.

In a policy brief titled, “Structural Transformation: The Impact Of Municipal Electricity Pricing Policy On The Foundry Industry” by Lauralyn Kaziboni, Zavareh Rustomjee and Ian Steuart for the University of Johannesburg’s Centre for Competition, Regulation and Economic Development, it was found that many industrial users complained that municipalities unjustifiably increased the demand charge component of the tariff, which was more difficult for the National Energy Regulator of South Africa (Nersa) to regulate.

“Very few municipalities have carried out independent cost of service studies, which would provide an objective basis for tariff determination, particularly the demand charge component.

“In the absence of this, Nersa benchmarks municipalities against Eskom’s cost of service data and uses this as a guide for determining acceptable tariff increases. In many cases, municipal tariffs are much higher than enjoyed by the equivalent Eskom customer,” the authors found.

They added that while there was “an unresolved dispute over the constitutionally‐derived powers of municipalities to set electricity tariffs”, Nersa’s power to sanction municipalities on electricity pricing had never been invoked or tested.

Cape Times

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