The City of Tshwane needs to increase electricity tariffs by more than the guideline 7.64% to, among other things, pay for “duplicate” staff in its electricity department.
This is what a senior city official told a Nersa panel on Friday, at a hearing during which nine municipalities were asked to motivate why they needed electricity tariff increases above the guideline provided by the energy regulator.
The increases, if approved, would take effect on July 1. Nersa will announce its decision on whether or not to approve increases later this month.
City of Tshwane director of life supply services Phillip Sivhada told the panel the city needed to increase its electricity tariffs by 8.68% to generate an additional R189 million in revenue.
The money would be utilised for repairs and maintenance (40%), security of infrastructure (10%), revenue protection (15%) and R66 million or 35% for extra human capital.
He said the city planned to appoint at least 100 artisans and artisans’ assistants, explaining that many of the city’s electricity staff members were getting old. When prompted, he said many staff members were too old to go out on jobs. It is difficult to get rid of them in light of labour legislation and, as a result, the city has to appoint “duplicates”, he said.
Sivhada said the city’s electricity distribution losses increased to 16% in 2014/15 as a result of administrative errors, professional electricity theft, tampering with meters, fraud by employees, under-billing and unmetered connections.
He said 9% of electricity was lost due to “non-technical losses” – the term referring to electricity theft. This was presumably included in the 16% distribution losses.
Revenue is lost as a result of consumers switching to renewable energy, closure of factories such as Consol Glass, competition with electricity resellers and frequent power failures due to cable theft, he said.
Sivhada said the city wanted to reduce the 16% distribution losses to 12% and had taken several other steps to improve the situation. He referred to the appointment of a new smart metering service provider to replace the controversial PEU Capital Partners.
The new service provider, Accenture, is expected to start operations in August, but Sivhada said negotiations had not been concluded and he could not give any details about its programme.
Pieter Rautenbach, national advisor on community structures for civil rights group AfriForum, objected to Tshwane’s application.
He questioned Tshwane’s argument that declining electricity revenue was the result of lower sales and pointed towards the controversial PEU contract, illegal connections and non-payment for services instead.
Rautenbach criticised the city for its failure to cut costs to fit its income and said with proper management an electricity tariff increase within the Nersa guideline would suffice.
DA spokesperson on finance in Tshwane, councillor Lex Middelberg, also objected to the city’s submission. He said the PEU contract was the root cause of Tshwane’s application for an increase above the guideline.
Middelberg said the contract had cost the city R2.2 billion so far and it planned to pay over a further R1 billion to PEU by the end of the month.
He said the city was budgeting for a surplus of R1.9 billion in 2016/17, which negated the need to burden consumers with an excessive tariff increase. He further pointed out that 8% of Tshwane’s consumer debts was not being collected.
He also questioned the lack of cost-cutting measures in the city’s presentation.
Nersa regulator Thembani Bukula pointed out that the causes for Tshwane’s distribution losses were within its control and said if Tshwane addressed those issues, it would not need approval from Nersa for an extraordinary tariff increase.
The other municipalities that applied for increases above the guideline are: Rustenburg Local Municipality, Tokologo Local Municipality, Centlec, Randfontein Local Municipality, Thembelihle Local Municipality, Oudtshoorn Municipality, Msukaligwa Municipality and Dipaleseng Local Municipality