Electricity tariff increases come into effect on Thursday

All City of Cape Town electricity users will as from Thursday 01 July, pay more for electricity, when the new 2010/2011 budget comes into effect. The need to increase City electricity tariffs is due to Eskom's 29% increase on bulk tariffs to the City. This increase, together with expenditure on salaries and wages, repairs, maintenance and upgrades of the electricity network, requires that the City increase its electricity tariffs by an average of 24,6% for the coming financial year.

The tariff increases only affects City of Cape Town electricity users and not residents who fall in the Eskom distribution areas (for example parts of Table View and Durbanville, etc.) where Eskom tariff increases were already implemented in April.

The three existing broad tariff domestic usage categories, namely the Lifeline, Domestic Low and Domestic High Tariffs, will remain in place, but the tariff bands have been adjusted.

The City will in the coming year spend R538 million on extending and refurbishing the electricity network, including upgrading transformers, electrical cables, power lines and substations. Energy conservation and the development and investment in alternative energy sources will also be a priority for the City in the new financial year.

Domestic High Tariff

The Domestic High Tariff will as from 01 July be charged for residents who use more than 1 500 kWh per month. This was previously for those who use more than 800 kWh per month, but has been adjusted to 1500 kWh per month. This tariff band adjustment is the first step towards phasing out the Domestic High Tariff and its Service Charge. This phasing out process is expected to take another two years to complete.

Residents who use more than 1 500 kWh per month will be charged an energy charge of 91.17 c/kWh (incl. VAT) and a service charge of R7.50 (incl. VAT) per day. This service charge is used by the City to recover a proportion of the cost of salaries, support services, network expansion, repairs and maintenance of the Electricity Department. The service charge is a daily fee and works out to the same amount over a year, whether you buy once a week, once a month or once a year. Residents are therefore reminded that when they buy in bulk, the service charge will add up and will amount to approximately R225.00 per 30 day month or R232,50 per 31 day month, regardless of whether electricity is purchased in this month or not.

Example:

Domestic Low Tariff

Residents who use between 400 and 1 500 kWh per month will be charged according to the Domestic Low Tariff. Unlike the Domestic High Tariff, there is no service charge for the Domestic Low Tariff. This category has been widened from 400 to 800 kWh to between 400 and 1 500 kWh. Users who used to use between 800 kWh and 1 500 kWh per month will now be charged according to the Domestic Low Tariff and not the Domestic High Tariff and will therefore also not pay the daily service charge anymore.

Examples:

Lifeline Tariff

This tariff applies to people who use less than 450 kWh per month. Such users who purchase less than 400 kWh per month receive 50 kWh per month free. The Lifeline customer will pay 66,25 cents per unit for the next 100 units purchased (51 to 150 units), and 80,34 cents per kWh for the next 300 units purchased.

This year sees the introduction of an inclining block tariff for the Lifeline customers. The key reason is the ‘jump' in the monthly account between customers using on average 450 kWh per month, and those using on average 451 kWh per month. If no structural changes were made to the tariff this jump would reach completely outrageous amounts in a couple of years (up to 200% increases in the user's account would have been possible simply for receiving one extra kWh). The introduction of the inclining block tariff this year is the first step in a process to prevent these increases from happening. In addition, this is the first step in the intention to move to an inclining block tariff across all users over the next few years.

Examples:

Statement issued by Alderman Ian Neilson, Executive Deputy Mayor and Mayoral Committee Member: Finance, June 29 2010

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