Joburg’s third attempt to load prepaid electricity bills with a monthly charge should fail

The City of Johannesburg’s third attempt to add a fixed monthly charge to prepaid electricity bills must end and not be resurrected.

OUTA has submitted a formal objection to the City on this aspect of the metro’s draft budget for 2021/22. The City proposes adding a fixed monthly service charge of R230 (incl VAT) to domestic and R460 (incl VAT) to business prepaid bills. It has been reported that the City plans to drop this proposed levy, but we have not seen any official confirmation of this.

It’s the third year that the City has tried to add a monthly surcharge for prepaid electricity users. The previous attempts failed, as they should have. This attempt should fail too.

The economic situation facing residents is extremely difficult, particularly after the pandemic lockdowns.

OUTA believes the proposed costs are unreasonable, particularly as prepaid electricity is usually used by lower-income households and SMMEs.

For a household, the cost of buying 350kWh a month would increase from R596.17 to R913.00 (53%) with the new levy; even if the levy is removed, the power charge increase takes the bill to R683.00 (a 15% increase). Using 500kWh a month increases from R791.53 to R1 248.78 (58%); without the levy the increase is to R1 018.79 (29%). “These charges are unreasonable and unjustifiable, particularly in the lower blocks,” says Brendan Slade, OUTA Legal Project Manager.

"The City should produce a cost-of-supply study to motivate the need for such a charge. In the absence of such a study, we regard this charge as irrational and call for it to be reconsidered,” says Slade .

The City’s draft budget documents are contradictory, with the prepaid surcharge included in two sets of tariff documents but not in the tariffs in the main Budget Book. This is confusing and gives the impression that the City wanted to establish this new charge without proper public oversight.

There is also no way for the public to establish what City Power spends per kWh to provide the electricity service, as these costs are not clearly available. There is also no indication that the revenue from such surcharges would be ringfenced for clearly identified expenses.

“The lack of transparency suggests the City of Joburg has an opportunistic approach to improve revenue to compensate for its declining financial situation,” says Slade.

The City’s budget documents do not explain how such a monthly charge would be levied on a prepaid bill, and whether it would have to be paid upfront before any electricity could be purchased. This could lead to a situation where a household would not have enough funds to pay for electricity after paying the surcharge.

The City is moving towards more surcharges on bills, which means consumers are less able to control their costs by reducing their usage, putting consumers in a difficult situation.

OUTA believes the City should make more effort to cuts costs. This includes reducing the electricity losses. While the City’s budget does not say how much of the bulk electricity it buys from Eskom and Kelvin is lost, it does say that it hopes to reduce losses to 24%. This is a very high rate of losses, well above the benchmark of 10% set by the National Energy Regulator (NERSA).

“This is a significant cost which should not be loaded onto customers,” says Slade.