and expanding on some of the above statements
Here is a detailed breakdown of the points you raised, exploring how lost electricity affects paying customers, the true mechanics of Free Basic Electricity (FBE), and the legal standing of consumers.
1. The Burden of Subsidizing Stolen/Lost Electricity (Non-Technical Losses)
Your assumption that a 21% loss rate severely hurts affordability is entirely correct. When a municipality reports electricity losses, they are broken down into two categories:
- Technical Losses: These are unavoidable physics. As electricity travels through transformers and kilometres of copper wire, energy is lost as heat. This usually accounts for 5% to 8% of total losses.
- Non-Technical Losses: This is outright theft. It includes illegal connections (Izinyoka), bypassed meters, "ghost vending" (syndicates selling fake prepaid tokens), and meters that are broken and no longer recording consumption.
How the paying customer subsidizes this:
When the City of Tshwane (or any metro) applies to the National Energy Regulator of South Africa (NERSA) for a tariff increase, part of their Cost of Supply (CoS) calculation includes a "pass-through" allowance for energy losses. NERSA generally allows municipalities to recover up to around 10%–12% of total losses through their approved tariffs. This means the cost of that stolen electricity is baked directly into the unit price (c/kWh) that legal, paying customers are charged.
However, because losses in metros like Tshwane have climbed to 21% or more, the municipality exceeds NERSA's allowable limit. The metro has to absorb the difference (the remaining ~10%). This creates a massive hole in the municipal budget. To survive this shortfall, the municipality often halts infrastructure maintenance or delays paying its Eskom bulk account. This creates a vicious "utility death spiral": tariffs skyrocket to cover the legal threshold of losses, while grid reliability collapses due to underfunded maintenance, prompting paying customers to go off-grid with solar, leaving even
fewer paying customers to carry the financial burden of the theft.
2. Free Basic Electricity (FBE): Decrees vs. Reality
Your assumption that FBE acts as a 1:1 cross-subsidy heavily borne by paying domestic users requires a slight, but important, correction.
How FBE is actually funded:
FBE is not primarily funded by overcharging standard municipal electricity users. Instead, it is funded by the National Government. The National Treasury allocates an "Equitable Share" grant to all municipalities every year. This massive grant is specifically designed, and funded by national taxpayers, to pay for the provision of basic services (water, refuse, and electricity) to registered poor households.
The numbers for the City of Tshwane:
To qualify for FBE in Tshwane, a household must formally register on the city's
Indigent Register. The criteria state that the combined household income must not exceed the equivalent of two state old-age pensions.
- The Allocation: Registered indigent households in Tshwane receive 100 kWh of free electricity per month (higher than the national minimum of 50 kWh).
- The Problem: The issue is not the size of the allocation, but municipal mismanagement of the Equitable Share funds. Frequently, municipalities use the National Treasury grant intended for FBE to plug other operational holes (like paying salaries or covering non-technical electricity losses) instead of ring-fencing it for indigent electricity purchases. When the grant money runs out due to mismanagement, the municipality is forced to try and recover those costs through standard tariff cross-subsidization, which artificially inflates the bills for paying households.
3. Legal Recourse: Do paying consumers have a leg to stand on?
Consumers and businesses absolutely have legal standing to challenge unlawful municipal tariffs, and active court cases are currently proving this.
You asked if municipalities are just pushing residents to the absolute limits to recover from failures on other fronts—the courts agree that they are, and that it is illegal. The legal framework protects consumers through NERSA's Cost of Supply (CoS) mandate. Municipalities are legally forbidden from using electricity tariffs as a "hidden tax" to fund other failing municipal departments (like roads or sanitation) or to cover their own gross inefficiencies (like failing to curb cable theft).
Active Legal Action:
As highlighted in the initial article analysis, civil rights organizations and business chambers have recently scored massive legal victories:
- AfriForum: Successfully took NERSA and over 100 municipalities to the High Court in 2022, 2024, and 2025. The courts ruled that NERSA’s methodology of just granting benchmark tariff increases without verifying a municipality's actual Cost of Supply was unconstitutional.
- Business Chambers: Entities like the Casting, Forging, and Machining Cluster of South Africa (CFMC) and the Pietermaritzburg and Midlands Chamber of Business have launched direct legal actions against municipalities (like Johannesburg, Ekurhuleni, and Msunduzi). They are demanding retrospective tariff relief (refunds) because the municipalities overcharged them using unlawful tariffs.
The Consumer's Leverage:
The paying consumer's primary legal leverage is the
Cost of Supply study requirement. If a municipality cannot mathematically prove (via audited financial data) exactly what it costs to deliver 1 kWh of electricity, it is legally barred from increasing tariffs. Because municipalities have historically used electricity revenues as a slush fund to hide massive financial failures, forcing them to produce a transparent CoS study strips away their ability to arbitrarily push those costs onto the paying consumer.
