Municipalities under pressure to balance rising electricity costs with residents’ ability to pay

Residents in 176 municipalities supplied with electricity by their local councils paid higher electricity tariffs from Wednesday after implementation of increases approved by the National Energy Regulator of South Africa (Nersa).

Among the major metros affected are the City of Ekurhuleni, with a 12.70% increase; Nelson Mandela Bay, with a 10.09% increase; and eThekwini, with a 9% increase. Tshwane increased tariffs by 8.80%, Johannesburg by 8.63% and Cape Town by 7.50%.

Reacting to the increases, South African Local Government Association (Salga) president Bheke Stofile said municipalities are under growing pressure as they balance rising electricity costs with residents’ ability to pay.

Stofile was speaking at a conference hosted by Salga where mayors and speakers from around the country were expected to deliberate on local government matters before the elections on November 4.

“Electricity prices approved by Nersa have become an albatross around the neck of municipalities as they have to face communities who can no longer absorb the final tariffs. This is while they buy bulk services at increased prices. This causes tensions between affordability and sustainability,” said Stofile.

He said municipalities are left to manage public dissatisfaction even though many of the cost drivers are determined outside local government.

Stofile said Salga has repeatedly raised concerns about what it describes as a mismatch between the tariff increases granted to municipalities and the costs they incur in distributing electricity.

According to Stofile, municipalities must fund network maintenance, staffing, repairs, cable theft and vandalism, technical losses and ageing infrastructure, but these costs are not fully reflected in the tariff methodology approved by the regulator.

He also pointed to the timing difference between Eskom’s bulk electricity price increase, which takes effect in April, and municipal tariffs, which are implemented from July.

“The three-month misalignment between Eskom increases in April and municipal tariff implementation in July deepens the damage because municipalities have absorbed higher costs before lawful revenue adjustments,” Stofile said.

Sowetan