Residential Electricity tariff with monthly service fee for CT.

Proposed new residential Electricity Tariff, the Home User Tariff to include a R242 per month service fee for Cape Town households as of 1 July 2017.  Note that the City has put this service fee on hold for 2017 /18 due to the high level of objections. Keep a look out for the 2018 /19 budget in April 2018 to see if it is reintroduced.

Background: Many households responded to the above inflation increases in electricity in the past years by reducing consumption and/ or investing in energy saving technologies (e.g. solar geysers). According to Ald. Ian Nielson the City’s electricity consumption peaked in 2009.  As a result, revenue from electricity sales is reducing and the City is looking at new pricing models. Revenue from electricity sales has traditionally been used to subsidize electricity to lower income households and other City services. If it were all to come from property rates, that would be a skewed burden.

While revenue is down, the costs to the City are increasing as ESKOM electricity escalates and the number of citizens in need of a range of subsidized services increases.  The City’s solution is to reinstate an infrastructure or service fee in the form of its proposed Home User Tariff.  This tariff will apply to home owners and includes a monthly infrastructure or basic service fee to be added to the rates account along with the other monthly services such as refuse removal.  So the City plans to charge R242.70 per month for the access to electricity. Table of charges below based on the 2016 /17 budget. Actual charges from 1 July will be based on the 2017 /18 budget which is published for comment in April / May each year.

Consumption Home User Tariff

per kWh incl. VAT

Domestic Tariff

per kWh incl. VAT

below 600kWhs R1.47 per kWh. R1.87 per kWh.
above 600kWhs R2.28 per kWh R2.28 per kWh

Below are extracts from a letter to City of Cape Town Manager objecting to the proposed new Home User electricity service charge on the 2016/17 Draft budget with reply from Mr Kevin Jacoby, the Chief Financial Officer. 

1 I believe that the draft 2016/17 Cape Town residential electricity tariffs include punitive measures for energy efficient households in the form of the proposed new Home User residential tariff. This tariff includes a separate monthly service fee of R242.73 irrespective of how much electricity you use.  Energy efficient and single person homes will pay the same service fee as energy hungry homes.   This is not equitable. 

Understanding the challenges to the city of providing reliable services and wanting to live in a functional city, the principle of a charge for infrastructure is reasonable.  It is the application of the service charge that is problematical.  The one size fits all approach will significantly increase the electricity cost to lower consumers of electricity, be they households that have invested in energy efficient behaviour & technology, or homes with single occupants.  The table below shows that households using below 600 kWhs (units) will experience the biggest increase in electricity expenditure.  Households using more than 600 kWhs per month will experience no difference.  How can this be fair?

Table 2: Comparison of charges on Domestic and the proposed Home User Tariffs.

Consumption level in kWhs Rand Cost on Domestic Tariff Rand Cost on  Home User incl service fee Cost Difference Percentage Difference
0 0 242,73 242,73          100%
150 281,31 463,35 182,04 64,71%
250 468,85 610,43 141,58 30,20%
300 562,62 683,97 121,35 21,57%
600 1125,24 1125,21 -0,03 0,00%
750 1467,33 1467,3 -0,03 0,00%
900 1809,42 1809,39 -0,03 0,00%
1000 2037,48 2037,45 -0,03 0,00%

City Reply:  “The home user tariff serves to cover the fixed costs of rendering the service (costs of capital and salaries being major contributors), and do not vary at all with energy consumption.  As such whether the household is large or small, efficient or inefficient, they place the same load on the business and should pay their share of the costs. The benefit to the customer comes from the energy charges where a lower user will pay less and a higher user would pay more.” 

Comment on above. Except that the table shows that this is not true.

While consumers over 600kWhs are paying a higher per kWh charge there are additional costs associated with high consumption such as:

  • Higher bulk purchases from Eskom which contradicts the City’s Game Changer Strategy of reducing its dependence on ESKOM.
  • Ongoing high carbon emissions with the resulting Climate Change impacts and in contradiction with City policies on environmental sustainability.

Service fee tariff blocks rather than one fee for all would be more equitable. This will ensure that low electricity consumers do not carry a service charge burden out of proportion to their energy consumption. 

City Reply: “On the current Domestic Tariff the higher users are currently paying more than their fair share of the fixed costs and are subsidizing the lower users.  While in principle this is acceptable, in reality it presents affordability challenges, and results in an unsustainable solution for higher users and the utility (City) itself. “

Comment on the reply above.  The City is nervous of more higher income households going off grid as the cost of renewables comes down. This is likely to happen anyway unless the City can provide incentives for these households to become part of the energy generation supply.

2 How will the service charge will be levied?  City officials favour including it on the rates account as an additional service levy along with the refuse, sewage and water charges.  This places the burden on those property owners in the city who do pay rates.  It would be more equitable for every residential consumer not on Lifeline to contribute to the costs of electricity infrastructure?  I have heard about the complaints the City had to deal with when the previous service fee was included in the pre-paid electricity vendor system.  However, education and pro-active messages on the pre-paid receipts warning about the remaining service charges for the month in question could address this.  Loading ratepayers with the full cost of service fees may be an easy option for the city but it is not a fair one.

City Reply:  “By far the majority of ratepayers are homeowners resident on their premises.  As such the point about each consumer paying the service charge becomes irrelevant. However, in situations where there are tenants, we anticipate that the service charge will simply become an item in the lease agreement and the tenant will pay the charge.  In terms of the City’s Electricity supply by-law, the property owner is the customer and as such, it is right that they are billed for these costs.”

Interesting times indeed.  We need creative solutions to the changing energy market and models not just more expensive services.

Kim Kruyshaar  February 2017

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19 Responses to Residential Electricity tariff with monthly service fee for CT.

  1. Douglas March 3, 2017 at 7:26 am #

    Fact is more and more electricity and water is stolen across western Cape municipalities every month. We have very fair and equitable laws in place. The focus needs to be far more on proper enforcement and collection of revenue from non payers. Property owners where a debt can be attached to a sellable asset is the easiest but most unfair way to avoid the difficulties of enforcing the law where it needs to be enforced. Robbing Peter to pay Paul is cowboy tactics and should have no place in a DA environment

    • admin March 4, 2017 at 7:14 pm #

      Not wanting to be a voice for the City of CT, it is nevertheless my understanding that the challenge is the energy and urbanisation transitions that we are facing rather than large scale electricity theft. Yes! we have all heard about the police having to escort electricity dept technicians when illegal connections are removed. However, CT appears to be pro-actively managing illegal connections and account defaulters. They are improving revenue collection by replacing thousands of account meters with tamper proof pre-paid meters. And many thousands of households who were benefiting from the subsidized Lifeline tariff and 25 – 60 kWhs of free electricity, but did not qualify are being shifted to the domestic tariff.
      While it is human nature to look to others, in this case electricity thieves, as the reason for the increasing cost of electricity, the reality is more complex. CT is one of the fastest growing cities in the country with an in migration of people who need basic services but who can’t pay for them – at this stage. Central government is supposed to provide local authorities with adequate funds to subsidize the basic water, sanitation and energy needs of so-called indigent citizens but the funds and the needs are mismatched. So in Cape Town much of the revenue to provide citizens with subsidized electricity on the Lifeline tariff comes from the `profit’ the city makes through the sale of electricity to other residential and commercial consumers. It is an old model, and an international one, namely to use the revenue from the sale of electricity to subsidize services such as libraries, clinics, recreational spaces etc, but now with our rapidly growing City the demands are out of sync with the revenue. Then along comes ESKOM with its rapidly increasing electricity costs, and a monopoly position which means local authorities can’t generate or negotiate with independent power producers. If that is not enough for the City, consumption and revenue from the very sectors that can afford to pay is decreasing as wealthier domestic and commercial consumers opt for LED lighting, solar geysers and own generation with PV.
      So while I don’t believe the problem is theft, I do think the City is not engaging with us sufficiently about how to transition to a sustainable affordable energy model. A successful energy future will require active informed consumers who understand the energy issues, are responsive to shifting their consumption to off peak times when the system is constrained and where possible contribute by feeding in their own PV electricity. Exciting times – stifled by too much red tape, vested interests and politics at all levels.

    • Petal April 20, 2017 at 8:10 am #

      True, it is not fair towards people paying rates etc. every month and now this. We who are paying only have “so” much money to give. What will they do if we run out of money, ask “Paul”.

  2. Robin May 9, 2017 at 11:44 am #

    Why should I pay for increase when I get my electricity directly from ESKOM. Why are you always hitting the soft targets. Are the informal settlements paying for any of there services kindly prkvided by the so called City that works for you. I don’t think so. You are forcing the honest ratepayer to join the ranks of the dishonest. You then have the ordacity to fine them. Are the informal settlements being fined? Definately not. Get your act together. We as rate payers have spent a fortune on energy saving devices, and for this we still get penalized. I am disappointed totally.

  3. Michael Shaw May 16, 2017 at 11:18 am #

    Hi! My wife and I are residents in UK and own a small flat in Fish Hoek which we use when we visit our daughter who lives in Cape Town. The flat has a prepay meter and when there we usually purchase R250 worth of electricity approximately every 4 weeks. However, the flat is empty with supply switched off, using zero electricity for many months of the year. Can you explain how the new “service charge” will be applied in our case – it doesn’t seem fair that we will have to pay R250 each month before even using our modest amount of electricity and certainly not when the flat is empty! If the charge is to be applied how would it be collected, as we have a prepay meter? Thanks for your help. Michael S

    • admin May 18, 2017 at 6:11 am #

      hi Michael, you will be charged the service fee which in your case will be more like an availability fee. As in the service is available when you are in Fish Hoek. This is not uncommon and a number of people who own property in holiday resorts face the same situation. In the Nature’s Valley part of Bitou Municipality the service charge is R338 per month! It costs to keep the infrastructure maintained even when you are not there. It looks as if the charge will be on our monthly rates account as a newline item.

    • Debased ZAR August 8, 2017 at 1:29 pm #

      R250 is 2 pence per month in your currency. Stop complaining, and consider us locals who can’t even afford a cup of coffee in our own town because of inflated tourist sterling prices !

  4. D Duke May 18, 2017 at 5:04 pm #

    What is stopping the Munic from increasing the service charge to R100 or more per day. There is no protection for consumers from these blatant discriminatory charges. Despite the regulator limiting the electricity increase to below 2% the Munic bypasses this by implementing unfair service charges.
    We are already paying almost twice the cost per unit than the poor.

    • admin May 19, 2017 at 11:07 pm #

      The National Energy Regulator is required to approve the draft tariffs each yer and this is supposedly based on a cost of supply and small profit model. I do believe that our daily charge will increase each year until it is in line with daily charge for small scale embedded generation. That is grid tied roof top PV where the private producer sells electricity to the City. At the moment the daily charge for SSEG is in the order of R13 per day. The city will find it hard to justify two rates for providing essentially similar infrastructure. But no they can’t charge a ridiculous fee because it will then pay most of us to go off- grid.

    • KEITH July 3, 2017 at 1:05 pm #

      ONE MAKES REFERENCE TO THE POOR, THERE ARE VERY POOR PENSIONERS WHO ARE TAKING A TERRIBLE FINANCIAL STRAIN LIVING IN RETIREMENT VILLAGES AND THE LIKE. ONE GENT I HAVE JUST SPOKEN TO BUYS R50 A MONTH OF ELECTRICITY NOW HE CAN HARDLY AFFORD THAT BECAUSE HE APPARENTLY SUBSIDIZING OTHER POOR PEOPLE. WHAT IS YOU SOLUTION? bEARING IN MIND YOU MIGHT BE IN HIS SHOES ONE DAY!!

  5. Tertius Smit May 20, 2017 at 10:20 am #

    Will I still have to pay the service fee if my house is “off the Grid” am completely reliant on solar energy at my house.

    • admin May 20, 2017 at 4:51 pm #

      If you have a live connection to the City grid then yes you will have to pay the service fee. You could apply for a disconnection but consider that the City is probably going to increase the Home User service fee to the equivalent of the service fee that the small scale energy generators (mainly roof top PV) are paying. then it would be cost effective for you to stay grid connected and apply to sell your day time surplus to the City. Right now day time surplus electricity is not in high demand, but that could change as more people opt for electric bikes and cars. It also makes sense for the City to bring in more time of use tariff options to encourage customers to shift discretionary consumption to the mid day hours and away from the strong evening peak.

    • Debased ZAR August 8, 2017 at 1:32 pm #

      Of course. Consider it a “Generation Tax” because you are generating your own electricity….. that’s your city making sure you are always indebted to them – even if you are electrically independant.

  6. Sermone July 3, 2017 at 9:42 am #

    I am utterly shocked at this tariff increase – I used to purchase R200 electricity and receive 180.7kwh (units) with an additional 25kwh (units) free. I just bought a R200 electricity voucher and received 103.8kwh (units) and no free electricity at all – how am i supposed to afford this. what will happen when i can no longer afford the electricity i am in need of? how did this happen that i now pay basically am charged more per unit but receive soooooo much less. i cannot afford moving from a R350 max electricity purchase for the month to a R200 electricity purchase per week????????? CITY OF CAPE TOWN please explain to me this.

    • admin July 4, 2017 at 11:22 am #

      Please note I am not the City – but an independent energy auditor. It looks to me like the City has shifted you off the Lifeline tariff to Domestic 1. As of the 1st July Lifeline customers with pre-payment meters and a municipal property valuation of over R400 000 were shifted to the domestic tariff. This means that you will now be paying R1.69 per unit pre VAT and not receive any free units. The City is trying to limit the number of households who benefit from the subsidized rate to only those who pass its `indigent’ (economically vulnerable) means test. Depending on your income level you can apply to the City to be registered as `indigent’. email the City at customersupport.services@capetown.gov.za for the 2017 /18 criteria for an indigent subsidy. the website address is https://www.capetown.gov.za/en/rev/Pages/ApplicationForms.aspx but it is not opening at the moment???

  7. Julia Young-Pugh August 25, 2017 at 12:51 pm #

    I have just purchased R150 worth of electricity for my business and to my horror only rec
    eived 22.9 watts. that is R52.38 for electricity R18.42 for vat and R79.20 for service Charge!

    How can this be possible?

    • admin August 29, 2017 at 11:17 pm #

      You don’t say who your electricity supplier is? Is it eskom, local authority if so which one or an independent reseller like a business complex?

  8. Don August 30, 2017 at 3:42 pm #

    My wife and I use to pay R1.39per unit in march of this year. In April they said it was going up by 8%. Since the 25 April our electricity has gone up to R1.66per unit, that is not 8%. We also consumed around 10units a day as we are only home in the evenings. Since April we are using upward of 22 units a day. We even tried switching the geyser off and disconnecting everything except the fridges, we used 3.5 units with only the fridges plugged in. We are using cashpower and live in Pietermaritzburg.

    • admin August 30, 2017 at 4:40 pm #

      Msunduzi or Pietermaritzberg municipality has listed its electricity tariffs at the link. file:///C:/Users/Owner%20PC/Downloads/Approved_Register_of_Tariffs_and_Charges_2017_18__Electricity_Tarriffs_NERSA_Regulatory_Changes%20(1).pdf
      As there are a number of residential tariff categories, and I have no idea which one you are on,it is not possible for me to comment on your situation. Strange that your tariff went up in April unless you are an ESKOM customer. There tariffs go upon 1 April and the local authority ones go up on 1 July.

      22 units per day is high. I assume that you are reading this consumption off your meter and not by dividing what you are charged by the number of units you buy. If the latter, there could be additional charges such as service fees which are skewing the apparent cost of the units. The number of units used has nothing to do with the tariff increase. If your meter is really recording double the amount of units suddenly then either you are using a new appliance such as electric heaters, or doing more cooking with an oven or there is a fault with something like your geyser element which is running for too many hours. As the consumption drops when all appliances are off except the fridges, it does not sound like the electricity meter. Try switching off all appliances as you have done and then switching on the the geyser to see how much electricity it uses in an hour and then the oven and so on with any high wattage appliances to get an idea of what is suddenly using so much electricity.

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