Big Joburg electricity price hikes planned – Here are the details

The City of Johannesburg has published its draft electricity tariffs for the 2020/2021 financial year, which include a nasty shock for prepaid customers.

The proposed changes include above-inflation price increases for both residential and business prepaid customers, as well as an additional monthly flat payment of R200 and R400 respectively.

“All service and capacity charges across all customer categories are proposed to be increased by 8.1%,” the municipality said.

“The proposed increase to service and capacity charge is aimed at achieving greater balance between City Power’s revenue and cost structure by gradually increasing the contribution with a fixed income to more effectively compensate for the proportionally higher fixed cost structure of our operations.”

Joburg businesses will see a tariff increase of 5.80%, according to the draft document.

The proposed tariffs would be bad news for prepaid customers, however, as the municipality has proposed the implementation of a “capacity charge” on these customers – the proceeds of which would contribute towards the maintenance of the power grid.

“It is also proposed for residential and business prepaid customers to start making an appropriate contribution to the cost of operating and maintaining the City Power electricity distribution network to be available on-demand,” the municipality said.

“It is proposed to introduce a capacity charge of R200 for residential customers and a R400 for business prepaid customers.”

“It is envisaged that the particular customer categories will fully align to respective comparative tariffs over a three-year tariff journey,” City Power added.

In addition to this capacity charge of R200, the municipality is also pushing to reduce the threshold for prepaid tariff blocks as follows:

  • Block 1 to be reduced to 0-300kWh from 350kWh
  • Block 2 to be reduced to 301-500kWh from 351-500kWh
  • Block 3 to remain at all consumption greater than 500kWh

“The current residential prepaid tariff is still significantly lower when compared to residential conventional 60A tariff,” the municipality said.

“In order to better align between the two tariff categories, it is proposed to further review the structure of the residential prepaid tariff as well as to introduce a fixed monthly capacity charge.”

What this means for prepaid customers

In its draft electricity tariffs, City Power referred to an example of a household which consumed 374Wh of electricity every month to demonstrate the effect of the proposed tariffs.

At this usage level, the municipality found that the cost of residential prepaid was still significantly lower than conventional residential customers under the proposed tariffs – with their total monthly charges at R769 and R1,135.37, respectively.

However, using this same usage level as a base for comparison, we can determine that the proposed tariff increases would result in this prepaid household paying 46% more every month for their electricity.

Under the current tariffs, the total electricity bill for a prepaid consumer with a monthly usage of 374kWh is R526.

However, under the new tariffs, this same users would be charged a monthly bill of R769.

This proposed increase for prepaid residential tariffs is outlined below, using a monthly usage of 374kWh for comparison.

Current prepaid residential tariffs

Block Used Tariff Cost
Block 1 (0-350kWh) 350 R1.39 / kWh R487.97
Block 2 (351kWh-500kWh) 24 R1.60 / kWh R38.39
Block 3 (> 500kWh) 0 R1.82 / kWh R0.00
Capacity Charge R0
Total Charge R526

Proposed prepaid residential tariffs

Block Used Tariff Cost
Block 1 (0-300kWh) 300 R1.47 / kWh R440.01
Block 2 (301kWh-500kWh) 74 R1.74 / kWh R128.99
Block 3 (> 500kWh) 0 R2.02 / kWh R0.00
Capacity Charge R200
Total Charge R769

More prepaid increases over the next 3 years

Beyond the proposed prepaid electricity tariff increases outlined above, the City of Joburg also plans to increase the price of prepaid electricity steadily over the next three years to bring it in line with standard residential rates.

This will be accomplished by increasing the flat capacity charge of R200 which is included in the proposed tariff increases for the upcoming year, it said.

“It is expected for the tariff differential between the residential prepaid customer to be eliminated over the next three years by gradually increasing to the residential prepaid capacity charge over the next three years,” the municipality said.

“The proposed changes in the prepaid tariff structure will further reduce the difference between the two customer categories at a consumption level of 1,200kWh per month.”

“The proposed introduction of R200 per month capacity charge to residential prepaid customers will almost eliminate potential negative revenue impact due to high usage.”

The proposed tariffs were tabled on 29 May 2020, and stakeholders have until 23 June to comment on the rate changes.

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Big Joburg electricity price hikes planned – Here are the details