7.5% electricity price hike proposed

Consumers who receive their electricity supply from municipalities could be paying 7.47% more per kilowatt-hour come 1 July 2022. This is according to a consultation paper released by South Africa's energy regulator, Nersa.

The above-inflation increase will hit households hard, particularly those who are already struggling under the burden of rising petrol prices and interest rates. Nevertheless, the proposed tariff guideline is still lower than the 9.61% hike that went into effect on 1 April for consumers who receive their electricity supply directly from Eskom.

In the consultation paper, Nersa outlines four approaches it considered before recommending that a percentage guideline increase and municipal tariff benchmarks be used for the 2022/23 financial year. The recommendation also outlines performance targets which it says will encourage municipalities to "improve on revenue collection, energy losses, as well as spend sufficiently on repairs and maintenance of their networks to ensure delivery of a sustainable, quality service".

Nevertheless, a breakdown of the calculation reveals that of the 7.47% suggested increase, 6.37% goes to bulk purchases while a little over 1% will benefit repairs and maintenance, finance costs, bad debt provisions, charges from other municipal departments, general expenditure and salaries.

Nersa also outlined an approach that it is rolling out in parallel and will eventually see a change in the way municipal electricity tariffs are determined. This will see each municipality submitting an in-depth cost of supply study which will be used to determine individual municipal tariffs.

Pointing to time constraints for municipalities to develop their budgets, Nersa says it will not hold a public hearing on the consultation paper. Instead, stakeholders are requested to submit any comments on the paper by 22 April. This will give the regulator time to publish the final tariff guideline and benchmark by 11 May at which point municipalities can submit their tariff applications for approval.

It adds that public hearings will be held for municipal tariff applications that exceed Nersa's guideline on 8 June. Nersa anticipates that the final decisions on individual municipal tariff increases will be communicated by 15 June. These approved tariffs will come into effect from 1 July.