Battle over electricity hikes heads to court as regulator slams City of Cape Town tariff

But according to the Energy Regulation Act, no licensee, including a municipality, can enforce an electricity tariff that the energy regulator has not approved.

Nersa spokesperson Charles Hlebela said the City of Cape Town applied for an above-guideline electricity tariff hike due to load shedding, declining electricity sales due to energy efficiency, and people beginning to use self-generation in the form of Small Scale Embedded Generations (SSEGs).

Speaking about the reasons for the rejected application, Hlebela said: “The loss of sales due to load shedding is outside of the customer’s control, and it is not of their making. The customers owning the self-generation facilities still pay for the cost of being connected to the grid through applicable network charges. They are not exempted.

“[The] current pricing framework does not provide for a clawback mechanism for municipalities due to sales revenue losses,” he added.

According to Hlebela, the court procedure only suspends the 15.1% electricity tariff guideline if an interdict is sought, and many customers in the interim will suffer due to increased electricity prices.

“It is in this regard that we impress on the city to implement the Nersa-approved [15.1% electricity] tariff whilst proceeding with its judicial review application,” he said, warning that the energy regulator may “take the matter further if the city does not cooperate”.

‘Unsustainable and irrational’

Meanwhile, the City of Cape Town has labeled the 15.1% tariff increase as “unsustainable” and “irrational” and said it would lead to a deficit of R500 million for the municipality.

With the Eskom tariff increasing by 18.5% earlier in the year, Nersa’s proposed tariff would stifle service delivery and hamper attempts to minimise the impact of load shedding, they said.

The municipality defended its decision to implement the 17.6% tariff increase, saying it is in line with its cost and supply calculation to ensure that the cost of electricity can cover the cost of providing electricity, investment in infrastructure, and plans to end load shedding.

“From the city’s tariff increase, 70% of the money will be used to buy bulk electricity from Eskom, with the remainder for the reliable services and investments to end load shedding and buy more affordable power on the open market,” it said.

In response to Nersa’s assertion that the electricity tariff is unlawful, the city said Nersa informed the municipality of its decision on the tariff increase too late in the financial year to adjust municipal budgets that had already been approved by National Treasury and city council.

“Nersa formally informed the city of its decision on the city’s 2023/24 tariff application on 30 June. It became practically impossible for the city to seek relief from the courts before the start of the municipal financial year on 1 July. The Municipal Finance Management Act does not provide for amendment of tariffs once approved.”

It said the energy regulator was unlawful in its decision-making and did not consider the electricity cost and supply information the city provided to apply for above-guideline tariff increases for 2022/23 and 2023/24.

Municipality under fire

The City of Cape Town has also come under fire by its residents and politicians for implementing the tariff, 2.5% above Nersa’s approved guideline.

The municipality has received numerous complaints about its high electricity tariffs.

News24 previously reported that a total of 1 400 complaints were received for the city’s budget, with a majority of concerns including electricity tariffs, load shedding, and increasing property rates.

Lobby groups STOP COCT and Electricity Tariffs Must Fall also plan to protest against the electricity tariffs.

Nersa confirmed that it has also received complaints to institute disciplinary proceedings between the city and its customers over electricity tariffs. – bbc.com