Update

GEORGE NEWS - A local businessman, Onne Vegter, says the new electricity tariff structure in George forces residents to choose a consumption capacity limit, penalising those who "wisely" choose the maximum limit (60 ampere).

Vegter reacted to George Municipality's new tariff structure that activates a fixed monthly cost if the maximum capacity need of a household is over 20 ampere (A). The fixed cost incrementally increases as the capacity need increases to 30A, 40A, 50A or 60A.

"It is a ridiculous way of calculating electricity tariffs and justifying the increase. Capacity needs fluctuate depending on season, appliances used, and number of people at home," says Vegter.

He uses an example of a household of five with two students at a university out of town. It will have a low capacity need in summer during university terms and 20A or 30A capacity should be enough. 

However, during winter holidays, when five people are at home, with more appliances running, the geyser working more, and more heaters or air cons on, the capacity should be a lot higher, but only for a season.

"You are now forcing the household to choose a higher, more expensive capacity limit for the whole year, just to make it through the winter holiday season with a full household. So essentially you are penalising people for the whole year based on their peak capacity needs. The fact that electricity is so expensive is already an incentive to use less, which is obviously why the municipality is implementing this system."

Vegter says homeowners with a second dwelling or flat on their property where there is one meter, will be forced to choose the maximum capacity, of 60A. This penalises both households that may each be using only 30A.

In a statement last week the municipality said average households - that make up the majority of its customers - will be able to function within the 20A limit if they manage the way they use electrical equipment.

Vegter says to keep below 20A will be very difficult. "You will not be able to boil the kettle or use the heater while your geyser is on if you have a big geyser."

He suggests a flat rate per unit for everyone, regardless of capacity, with a monthly allocation of free units to help the poor. "And it should not be more expensive than any other municipality in the country. The fact that George Municipality pays Eskom a maximum demand charge and for maximum capacity, should not be justification for an unfair cost recovery system for residents. The residents of Johannesburg fought against this same fixed tariff system and it was not implemented."

Vegter says the billing system is complicated and hard to understand for the average resident. It is also costing the municipality to implement the system. "The money could rather have been used to create infrastructure for our own power generation. In Cape Town the impact of load-shedding is less severe because the city is generating some of its own power."

George Municipality commented as follows:

"The National Energy Regulator of South Africa (Nersa) stipulates the increase in electricity prices that Eskom may pass on to consumers (8,61% for 2022/23). Nersa uses a formula to determine the price increase that municipalities can pass on to consumers, which is normally lower than the approved Eskom tariff. Eskom distribution supplies electricity at the bulk price and the municipality is then responsible for maintaining their own distribution network and substations to power their domestic and business consumers. The costs of distributing electricity include the following: maintenance on power transformers, substations, overhead lines and cables; the maintenance teams, depreciation on equipment, as well as the internal use of electricity.

"George Municipality pays Eskom for the maximum capacity - which must be available throughout the year and Eskom also charges a maximum demand charge based on the highest demand.

"The municipality therefore pays Eskom a fixed cost throughout the year which cannot fluctuate, so even if a household only needs higher capacity for a small period, the municipality has to pay for the whole year on that additional capacity."

Lower your increase through load management

The municipality said the only variable cost is the energy cost, based on the time of use - which is why the municipality is splitting the tariff. The proposed tariffs have been developed in such a way that consumers who do some load management to limit their peak demand, will not experience an increase more than the average increase. 

Studies have shown that those consumers with the highest individual required capacity, incur the highest maximum impact on the Eskom charges and the municipal infrastructure costs.

George Municipality has structured its tariff to be a cost-reflective tariff which is in line with Nersa benchmarks of other local municipalities in South Africa. It must also be noted that one of the biggest reasons for the current high prices relate to Eskom's high price increases during the past 15 years. 

Indigent customers continue to receive free basic electricity as per the municipal indigent policy, but are also subject to the average increase that will be approved by Nersa.

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