R230 per month blow to prepaid electricity users in Joburg

 ·23 May 2024

The City of Johannesburg Council has approved the budget for 2024/25 financial year, which will introduce a new R230 surcharge for regular prepaid electricity users.

These prepaid users will also be hit with a significant 17.9% tariff hike this year (still to be approved by Nersa)—with the warning that large hikes are coming over the next three to five years.

The city’s Operating Expenditure (Opex) and Capital Expenditure (Capex) budget was approved during its 26th Extra-Ordinary Council Meeting on Wednesday (22 May), where it was passed by a majority vote of 145 members in favour and 10 against.

The total budget for 2024/25 financial year is R83.1 billion, made up of Opex at R75.7 billion and the Capex set at R7.4 billion.

“The city government understands challenges facing the city and is committed to continue to investment in refurbishing and replacing infrastructure that maximally responds to the needs of residents.

“In recent years, bulk infrastructure across the City has come under pressure for several reasons, such as ageing infrastructure that cannot cope with demand, the impact of load shedding on infrastructure as well as budgetary constraints,” it said.

Massive price hikes

Something that will come as somewhat of a shock to residents is the measures being introduced around electricity prices.

The city’s budget includes electricity price hikes ranging from 2.4% for commercial resellers to 18.4% for businesses on prepaid plans.

It noted that the proposed increases for FY24/25 are still subject to change in consideration of public consultation and the energy regulator’s NERSA approval processes.

These hikes are “therefore not final”,—but this is the intended plan in the final approved budget.

The significant increase in prepaid charges for businesses is only slightly higher than the 17.9% increase proposed for ‘high’ (regular) residents on prepaid.

This is an entirely new category of energy user established by the city, making good on its promise to split prepaid users into two categories.

According to the city the tariffs that are applicable to the residential customer category are generally below cost of supply and are subsidised by other customer categories.

“As it will not be feasible to make the residential tariff fully cost-reflective, some element of cross-subsidisation is necessary, though to be limited to levels that are economically sustainable,” it said.

“While that is the case, the price differential between the residential prepaid and residential conventional customer is still unjustifiably high.”

Surcharges for prepaid users

While the city wants to bring prepaid charges more in-line with conventional charges, it cannot do so where it affects indigent (low) households.

It is, therefore, splitting prepaid users into ‘high’ and ‘low’ subcategories, where the latter will be spared massive increases and will also be exempt from service and network capacity charges.

The budgeted increases are as follows:

  • Low Users (indigent customers): +6.91%
  • High Users (regular customers): +17.94%

The city has budgeted a service charge of R70 for high prepaid users and a network capacity charge of R130. Including VAT (15%) this amounts to R230 per month.

This is lower than the previously proposed surcharges, which would have amounted to R554 per month.

The city justified the charges based on the fact that, even though prepaid electricity users only consume electricity on-demand, the network still has to ensure that the distribution network has that electricity available.

“Compared to residential conventional customers, the prepaid customer contribution to network availability cost is still very inadequate and requires a substantial increase in the next three to five years to fully align with the conventional tariff,” it said.

DA caucus leader in Joburg, Belinda Kayser-Echeozonjoku, said that the budget was passed without proper consultation with residents.

She argued that the tariff adjustments and new surcharges were not reflective or fair to residents and that other structures, like use-based charges, were better.

She said that once the council adopts a budget, it is unlikely to be changed, even when there are residents’ protests.

The final approved budget can be read below:

Read: Eskom’s plan to avoid prepaid electricity disaster

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