Why Cape Town wants to make big changes to electricity tariffs

The City of Cape Town recently published its draft budget for 2017/18, which includes proposed changes to electricity tariffs.

Cape Town classifies its residential electricity customers into three tariff categories: Lifeline, Domestic, and Home User.

Lifeline customers with properties valued at over R400,000 will move to the Domestic tariff. Domestic clients with properties worth over R1 million will be migrated to the Home User category.

Clients who fall within the Home User tariff bracket will have to pay a daily service charge of R8.21 in addition to their usage. It should be noted that their first 600kWh is cheaper than the Domestic category.

“The implementation of the Home User tariff means that the increased financial burden from rising electricity prices is spread more equitably across the customer base,” Cape Town’s electricity department told MyBroadband.

It said it tailored the tariffs so customers who use less than 600 units a month, but live in a property worth over R1 million, pay a greater share.

“This means that the increase to lower/middle-income residents, who live in properties valued at less than R1 million, could be kept at 2.8%, rather than 3.34% which would have otherwise been required.”

The City said those with properties valued at over R1 million, and all customers making use of the old credit meters, will be placed on the Home User tariff.

However, anyone currently using 600kWh per month or more on average will see no financial impact as a result of the move.

“At this level, both the Domestic and Home User Tariffs have equivalent monthly accounts.”

Holiday and seasonal home owners

MyBroadband asked the City of Cape Town whether the change was aimed at holiday and seasonal home owners.

“Although not the aim, the above will be a consequence for seasonal homes valued at more than R1 million,” it said.

“The electricity networks that serve these homes need to be maintained, even if the holiday home is not in use.”

It said the daily service charge is aimed at recovering the cost of maintaining the service connection.

“Previously, this was built into the unit price for electricity. The introduction of the service charge therefore results in a significant decrease in the price of electricity per kilowatt hour.”

A summary of the proposed tariffs is shown in the table below.

Proposed Electricity Tariffs
Lifeline 2016-17 2017-18 %change
0-350 kWh (c/kWh) 110.68 116.28 5.06%
350+ kWh (c/kWh) 306.44 234.44 -23.50%
Domestic 2016-17 2017-18 %change
Service charge 0.00 0.00 0.00%
0-600 kWh (c/kWh) 187.54 192.80 2.80%
600+ kWh (c/kWh) 228.06 234.44 2.80%
Home User 2016-17 2017-18 %change
Service charge R7.98 R8.21 2.86%
0-600 kWh (c/kWh) 147.08 151.20 2.80%
600+ kWh (c/kWh) 228.06 234.44 2.80%

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Why Cape Town wants to make big changes to electricity tariffs