How to manage 2024 municipal electricity tariff hikes

The new tariffs follow an average increase of 12.74% for Eskom direct customers and 12.72% for bulk electricity supply to municipal customers which came into effect earlier this year.

Notably, the Gauteng High Court on Friday 28 July limited the roll out of tariff increases to 66 municipalities. The remaining 112 municipalities and private distributors were told to delay increases as they failed to provide the National Energy Regulator of South Africa (NERSA) with the required Cost of Supply studies to support their tariff applications. These municipalities were given 60 days from the date of ruling to deliver compliant applications, after which NERSA will have 30 days to make a determination.

Since then, NERSA has filed for leave to appeal the ruling. It's also told municipalities that its decisions still stand and to proceed with the implementation of the new approved tariffs while the appeal is being processed. 

Households getting electricity from the country’s major metropolitan municipalities will be disappointed to learn that they have been approved to go ahead with tariff increases in the double digits, as shown in the table below.

 NOTES:

*As approved in Special Regulator Executive Committee Meeting numbers 375, 376, 377 and 378. 
** Actual tariff increase for CoCT customers will be 7.2% as the municipality had been charging a higher base than what NERSA had approved.
*** City Power is also introducing new R70 service and R130 capacity charges (excl VAT) for residential prepaid (high) customers.

Don’t expect prices to come down

It was hoped that these Cost of Supply studies would see electricity prices decreasing, however, LookSee Executive Head, Marc du Plessis reveals that those municipalities that did submit the required study still required significant increases.

“In some cases, municipalities are going to have phase in tariff increases over several years before they are able to reach cost-reflectivity. City of Johannesburg customers, as an example, may be alarmed at their indication that they need a 21% increase, but this is still much lower than the 61% and 31.18% increase that have been indicated by Ba-Palaborwa and Mbombela respectively,” he explains.

“The good news is that NERSA has disallowed some costs and instructed these municipalities to provide multi-year implementation plans for phasing in cost-reflective tariffs.”

Du Plessis also points out that many municipalities are battling to manage the health of their electricity infrastructure due to theft, vandalism and age. This means municipalities will need to focus on improving revenue collection and reducing bad debt in order to be able to finance essential maintenance and repairs, he says.

Tackling high electricity bills

It’s a sobering outlook for households, who are already trying to combat the effects of elevated interest rates and stubbornly high inflation, with little in the way of financial relief.

“Households are increasingly looking at their rising electricity bills and the above-inflation tariff hikes and wanting to find solutions that will bring down their immediate costs, protect from future increases and even return money into their pockets in the long term,” says Du Plessis.

Home solar solutions are increasingly being considered for their potential to do just this, points out Du Plessis.

“Solar power isn’t just a solution to combat loadshedding, it helps families bring down their electricity costs in a meaningful way by using the power of the sun. Currently, our customers are telling us that their savings on their monthly bill are almost enough to cover the costs of their finance repayments.

“Of course, this gap diminishes with every tariff increase and once households pay off their finance, they’re putting all of those savings back into their wallet.”

Broadening access to solar

LookSee is also focused on making sure that more households can access the savings benefits of solar power, says Du Plessis.

“Solar is seen by many as an opportunity that is limited to the wealthy. Our belief is that solar power should be accessible – and affordable – to all South African homes. That’s why we’re putting effort into finding solutions that will have a broader reach,” he explains.

The first solution to come from this effort is the conversion of existing electric geysers to get power from solar panels. This quick and affordable process can save families upwards of 40% on their electricity bill, which is enough to cover the monthly repayments for almost all household types.

“The beauty of the geyser conversion process is that we’ve been able to do away with many of the problems that households had with the traditional solar geyser. As an example, leaving your geyser unchanged and in place means that there’s no need for expensive plumbing costs and your heating loss rates are minimal because your geyser is not placed on your roof and exposed to the elements.

“Most important though is the fact that most families save enough money from day 1 to pay for the conversion, with a little left over to put back into their wallet. This makes it a very compelling – and affordable – option for households who thought they’d never be able to invest in solar power,” says Du Plessis.

To assist with affordability, all of LookSee’s solar offerings qualify for its Solar Loan. Featuring interest rates starting at a low of prime plus 1% and capped at a maximum of prime plus 2.5%, the Solar Loan is available on values ranging from R3 000 to R300 000. What’s more, customers can choose up to 5 years to repay their loan with no penalties for early settlement.