The new R2,800 prepaid electricity ‘tax’ you can’t escape
Energy analysts say that a new R230 per month (R2,760 per year including VAT) prepaid electricity surcharge in the City of Johannesburg that came into effect this week is highly problematic and is unlikely to go unchallenged, say analysts.
But residents looking to bypass or escape the hike will find themselves in a tough spot.
The new rates that kicked in this week include a Nersa-approved 13% average tariff hike for electricity in Joburg.
While this hike will affect conventional electricity users, prepaid users will see other significant changes in their bills.
The city has split prepaid electricity users into two groups: low users, representing indigent households with lower electricity consumption patterns, and high users, representing all other regular households.
In a bid to shield indigent households from high tariff hikes, the increase for the low group will be limited to 6.9% for 2024/25.
However, to compensate for this, the tariffs for regular users will be hiked by almost 18%.
Adding salt to the wound, regular prepaid users will also be slapped with a new R230 (including VAT) ‘service and capacity’ fee, which will be charged regardless of the units bought.
This means that prepaid electricity users will be charged R2,760 per year just for having a prepaid meter.
Speaking to the SABC this past week, energy analyst Mthunzi Luthuli said the new service charge will have a massive impact on households using prepaid electricity and will likely lead to legal trouble for the City of Joburg.
“City Power has claimed that this is necessary to recoup some of their infrastructure and service costs, but this is problematic in the way that it was done because (the surcharge) is seen as over and above the prepaid electricity tariff increases.”
“I don’t think this can be justified, and (the city) will probably be taken to court for it,” he said.
The city’s own example bill, for 800kWh of energy, neglects to factor in the surcharges in its increase calculation.
Based on this profile, a prepaid user in 2023 would have seen a total bill of R1,916.76 (excluding VAT) to cover their energy costs.
However, in 2024, with the tariff increase and the surcharges added, this bill climbed to R2,360.57 (Ex VAT)—a 23% increase, far higher than the stated hikes.
According to energy expert Chris Yelland, when factored into the overall tariff increase, the service charges mean that prepaid users will effectively see a 45% to 65% tariff hike.
Yelland also pointed out that the purported justification for the extreme price hikes also falls flat when looking at the numbers.
He noted that the city’s register of indigent households does not reflect the number of poor in the city – where between 670,000 and 950,000 households are said to be indigent, but only 30,000 are registered for free basic electricity and lower rates.
No escape
A service and capacity charge on prepaid is not a new concept; the City of Cape Town also charges similar fees.
However, the City of Joburg’s implementation of the taxes has raised some eyebrows.
Unlike the City of Cape Town, which charges service fees on residents’ rates bills, users purchasing their first units for the month in Joburg are charged the fee.
According to Luthuli, this is going to result in residents getting fewer units out when they purchase electricity, which will be incredibly damaging, especially for poorer households caught unawares.
For example, anyone charging R500 for the first time in a new month will only get R300 worth of units.
“(The service fees are) a huge amount, and it means that if you buy units for a certain amount, you’re getting far less out of it to cover these fees. I think this is going to cause serious problems for City Power.”
This also means that residents can’t avoid the fee by simply not paying their rates—if they load up with the power they need, they will have to pay the fee.
Some prepaid users in Joburg have already reported getting hit with the fees.
Residents hoping to avoid the fees by not paying for prepaid electricity or holding out for as long as possible may also find themselves with another shock – the city is on the warpath against non-serving prepaid units and is looking to switch them out for post-paid meters.
In May and June, the City of Joburg reported that it had swapped out thousands of non-vending units in a wider clampdown on households, including those in affluent areas, who are not paying their dues.
The city has justified the new charges by pointing out that even though prepaid users only make use of whatever they pay for any given time, City Power still has to ensure that the energy is available, which has an impact on its network and operation costs.
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