Sunday, January 16

Electricity: Who Pays More? – Moneyweb


Municipal tariffs are eating up a growing share of family income in South Africa, and electricity especially is becoming almost unaffordable, says economist Mike Schüssler.

Of the amount that downtown Joburg tenants pay for their municipal bills, nearly half is for electricity.

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According to data from the Johannesburg Property Managers and Owners Association (JPOMA), their council’s bill accounted for 14.05% of tenants’ household expenses in 2009/10. Now it is almost 24%.

The largest increase (224%) during this period was in electricity rates, while wages increased by 91% and rents by only 80%.

JPOMA members together provide more than 40,000 affordable housing units, with capacity for about 200,000 tenants, according to information on their website.

However, the struggle to pay for electricity is not limited to these households.

Analysis

Using the rates approved by the electricity regulator Nersa, Eric Bott, an electricity expert at Energy Management Consulting, took a look at the total monthly electricity bill of different households in metro city councils and when buying directly from Eskom.

Schüssler compared this to BankservAfrica’s data on wage and pension payments in the bank accounts of South African consumers as the basis for his comments.

He says electricity costs amount to nearly 13% of the average take-home salary in the formal sector.

In the informal sector, incomes are lower and thus affordability is an even bigger issue.

Schüssler says that electricity costs represent 27.6% of the net income of the average private pensioner.

“A lot of people just can’t afford it anymore,” he adds.

Really poor households often receive some form of assistance from their municipalities or other parts of the government, but the middle class is largely alone.

Monthly electricity cost for small homes using 500kWh (R)

Tshwane Nelson Mandela Bay Buffalo city Centlect (Bloemfontein) City Power (Jhb) eThekwini Ekurhuleni Cape Town Eskom
Summer 1 128.97 1 039.80 1 211.81 1019.90 1,493.72 1,063.30 905.40 1 212.60 968.75
Winter 1 166.62 1643.52

* Conventional counters; VAT excluded; summer and winter rates differ only in two cases.
Source: Energy Management Consulting

In particular, small consumers in Ekurhuleni in the Gauteng East Rand enjoy the lowest rates, which are likely heavily subsidized by middle-class households, as the following data shows.

Monthly electricity cost for a typical townhouse using 750kWh (R)

Tshwane NMB Buffalo city Centlec City power eThekwini Ekurhuleni Cape Town Eskom
Summer 1,799.47 1,419.30 1 790.78 1 531.85 1941.97 1,546.95 1 823.54 1,932.73 1 642.03
Winter 1 831.80 2 166.67

* Conventional counters; VAT excluded; summer and winter rates differ only in two cases.
Source: Energy Management Consulting

The cost for middle-class urban households exceeds R2,000 per meter, and those in a few municipalities pay less than what Eskom charges its direct customers.

Monthly electricity cost for urban middle class households using 1000kWh (R)

Tshwane NMB Buffalo city Centlec City power eThekwini Ekurhuleni Cape Town Eskom
Summer 2 469.97 2 056.30 2 369.76 2,043.80 2 390.22 2 086.60 3 721.14 2 652.85 2 315.30
Winter 2 496.97 2 689.82

* Conventional counters; VAT excluded; summer and winter rates differ only in two cases.
Source: Energy Management Consulting

Cape Town residents have protested the high electricity rates under the organization Stop City of Cape Town (Stop COCT) slogan. In response, the city first issued a statement to end the “myths” that are spreading about it, then Mayor Dan Plato issued a statement blaming the Eskom monopoly for the high tariff increases being imposed on the city. city ​​Hall.

Plato indicated that current steps towards a liberalized electricity supply industry could allow the city to buy from other generators at lower rates.

He also emphasized that his city council absorbed the Eskom increase to some extent and capped its rate increase in July to 13.48%, while most other municipalities implemented a 14.59% increase in line with the municipal guideline of Nersa.

Rates ‘too complicated’

Bott says electricity rates are too complicated for the common person to understand, making it difficult to verify bills and make comparisons.

Apart from the sloped block rates where the extension of the blocks is not standardized between different municipalities, some distributors apply seasonal rates.

Read: The same old funding model can’t keep South African cities running or serve residents

Commenters have also criticized in the past the lack of transparency in the nature and scope of cross-subsidies between different user groups in a single municipality.

Bott says that the rates could be lower if the municipalities and Eskom operated more efficiently.

City Power in Johannesburg, for example, loses almost 30% of its electricity, mainly due to theft, and paying customers have to make up for those losses by paying higher rates.

Morne Mostert, head of local government affairs at AfriForum, says the cost of electricity is surprisingly high as Eskom’s strong increases impact end users. This, he says, increasingly leads consumers to alternative sources of energy. However, for smaller households it is difficult to find cost-effective solutions.

Read: Electricity rates will go up 15% (February 2021)

Advises corporations or resident associations to combine their efforts to achieve economies of scale. Otherwise, households that already use electricity efficiently will have no choice but to downsize their lifestyle, Mostert says.

He says that Nersa’s job is to take care of consumers, and he should take note of the increasing portion of family income that is being absorbed by the cost of electricity.

“Nersa must take this into account when considering requests from Eskom, but also from municipalities, for higher rates.”

Read: Eskom fights tooth and nail for massive price hikes

Hear Eskom CEO André de Ruyter discuss where the utility currently stands, electricity rates, its operational outlook and plans (in Afrikaans below) or read the English transcript here.


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