South Africa: Recent Municipal Tariff Hikes Under Scrutiny

With effect from 1 July 2019, municipal tariff hikes in South Africa kicked in with rate increases ranging from electricity to refuse and solid waste collection to water.

The municipal tariff hike that sparked the most interest is the increase in electricity rates, which municipalities are being accused of not following proper procedures in implementing the hikes.

Tshwane municipality has been at the centre of this debacle, and the energy regulator, NERSA, has given the municipality seven days, to explain why the metro wants to increase fixed charges to customers.

The regulator stated that Tshwane municipality’s current application for a hike is incomplete.

Adhering to legislative requirements

Commenting on the development, Ronald Chauke, OUTA’s portfolio manager on energy, said: “As OUTA we are concerned about the failure by both City of Tshwane (COT) and NERSA to adhere to legislative requirements and timelines.

“For instance, in terms of the Municipal Finance Management Act, NERSA was supposed to approve the municipal tariffs by no later than mid-March each year to enable the municipalities to go and consult their customers, prior to the new tariff implementation date of 01^st July. But this has not happened.”

Because of this failure, Chauke says, both NERSA and the COT are in breach of the law.

Chauke raised more concerns, stating: “What does it mean for NERSA to be conducting a public hearing for new tariffs that are supposed to be effective from 01^st July 2019 on the 11^th July 2019? Will NERSA make an urgent determination for the COT to implement interim electricity tariffs effective 01^st July or will the previously applicable tariffs for the 2018/19 continue to be applicable until a NERSA determination is made?”

Conduct cost of supply study

According to OUTA, on Thursday (11 July 2019) COT acknowledged under oath during a public hearing, convened by NERSA, that they did not conduct a cost of supply study.

“OUTA views this as both parties are at fault,” said Chauke, adding “for instance, OUTA has sent recommendations to NERSA as part of the 2018 consultation paper on municipal tariff guidelines and benchmarks that NERSA must include the issue of compliance by conducting a cost of supply study as a license condition to its licensees (i.e. municipalities).”

Expressing disappointment, Chauke said: “But it seems NERSA has failed to include OUTA’s recommendation into the enforcement framework, hence, municipalities are continuing to take advantage of lack of punitive measures and enforcement by the energy regulator.”

In terms of implementing hikes without proper consultation with consumers, Chauke stressed that this demonstrates the challenges that exist in the electricity distribution industry (EDI) leading to customers being ripped-off.

He highlighted that the COT is proposing an increase from the existing fixed charge for residential customers from R56 to R120 on a monthly basis “under false pretences, as evidence revealed that when they were conducting their alleged flawed consultation process”.

“It is obvious that bold interventions and structural reforms must be initiated from the policy front and there must be political will to correct this unfortunate service delivery phenomenon,” said Chauke.

Source: Esi-Africa.com