Durban to pay 4% more for electricity

Published Sep 22, 2008

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Durban residents should brace themselves for another electricity hike of roughly 4 percent with the introduction of a nationwide "environmental levy" on fossil-based electricity.

This is on top of recent tariff increases in Durban (averaging around 29,5 percent) which came into effect in July.

The new levy, which was announced by finance minister Trevor Manuel during his Budget speech in February, is due to be implemented on October 1.

It is aimed partly to reduce greenhouse gas emissions from coal-generated power and partly to reduce electricity demand in the wake of the Eskom power supply crisis.

Deena Govender, eThekwini electricity department spokesperson, said there was still uncertainty about the exact date when Eskom would implement the 2c/kWh tariff increase, but Durban customers could expect another increase when it was implemented.

Although the levy adds up to an approximate 10 percent increase on the base price Eskom charges to municipalities, the actual increase for Durban customers is expected to be less because eThekwini marks up Eskom base charges by about 100 percent - so the new levy portion for local residents is expected to add around 4 percent to monthly bills.

For example, middle-income households using 1 000kWh a month can expect tariffs to rise by about R20 a month (based on a 2c/kWh levy on the present price of 51c/kWh).

However, city treasurer Krish Kumar said there was still no clarity on how and when the levy would be collected.

According to a tax alert circulated by financial services group PricewaterhouseCoopers, some large industries and smaller municipalities which generate their own electricity will also be required to pay the 2c/kWh levy to the SA Revenue Service.

The levy is expected to affect industries (mainly the mining sector and energy-intensive manufacturers) which can generate more than 5MW using fossil-based fuels.

However, electricity generated through co-generation facilities or renewable sources of energy will not be subject to the levy.

Co-generation is defined by SARS as electricity from "steam, heat or other forms of energy as a by-product of another process".

Renewable sources of energy are defined as "biogas, biomass, geothermal, solar, water or wind", while non-renewable energy is defined as "coal, uranium, natural gas or petroleum-based liquid fuels".

Announcing the new "environmental levy" earlier this year, Manuel acknowledged that the introduction of a new tax was never a popular move.

"However, this is an instance where we hope that people will succeed in avoiding tax. Households and businesses which reduce their consumption by 10 percent or more will find that this levy does not affect their monthly costs."

Manuel said the levy was a first step towards other "targeted fiscal environmental measures" which would also help to curb power demand following the Eskom generation crisis.

He hoped the levy would raise about R2-billion during the 2008/2009 financial year and about R4-billion a year thereafter.

Further environmental tax reform under consideration included emission charges and tradable permits, tax incentives for cleaner production and reform of existing vehicle taxes to encourage fuel efficiency.

Manuel also hinted that he supported proposals to encourage biodiversity conservation by private landowners by way of income tax cuts.

South Africa, which produces more greenhouse gases than the rest of Africa, because of its reliance on coal-based electricity, is also expected to come under increasing international pressure to reduce greenhouse gas emissions which drive global climate change.

Govender said he believed most forms of renewable energy could not compete with coal-based power at this stage, but it was likely that the cost of electricity would double within just a few years - increasing the likelihood of some forms of renewable energy being able to compete more favourably with coal-based energy.

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