Major South African city targets wealthy electricity customers

City Power CEO Tshifularo Mashava says many affluent postpaid customers supplied by the utility have moved to prepaid systems to avoid paying the hefty fixed postpaid charges, and she wants to find a way for these customers to continue contributing.

She also said the utility is looking at ways to exclude lower-income customers from paying the R200 fixed monthly surcharge for prepaid electricity purchases.

“The R200 was implemented to ensure that residents in affluent areas, particularly those who have transitioned to prepaid meters, contribute to the maintenance and service costs, much like their postpaid counterparts,” said Mashave.

“However, we do recognise the sensitivity towards our customers in lower-income areas. As part of our ongoing efforts, City Power is exploring avenues to exclude these customers from paying the R200.”

She went a step further and said that many customers in affluent areas had transitioned from postpaid to prepaid to avoid the higher fixed charges paid by postpaid customers, which currently sit at around R1,000.

“That change in dynamics has forced the entity to find ways to ensure that those well-off customers who transitioned to prepaid continue contributing towards those essential charges,” she said.

“We are continuously reviewing our tariff methods and structures to ensure that the poor are cushioned from excessive increase.”

City Power prepaid customers were outraged in July 2024 when they were slapped with a roughly R200 surcharge on their first prepaid electricity purchase of the month.

“Topped up R500 this morning and got 99.30 units,” one prepaid customer posted on the MyBroadband forum.

They included a photo of their prepaid recharge receipt, which showed that roughly only R235 of the R500 went to electricity units.

City Power has repeatedly proposed implementing the charge over the past few years. However, the proposal was withdrawn following public outcry from the public and civil rights organisations.

Its eventual implementation took many residents by surprise.

This prompted the Organisation Undoing Tax Abuse (Outa) to urge City Power to reconsider implementing the surcharge.

Outa’s executive manager for local government, Julius Kleynhans, demanded that the charge be scrapped. He argued that the surcharges would have significant financial repercussions for Joburg communities.

“For many residents, particularly low-income families who rely on prepaid meters to manage their electricity usage, this extra R230 a month is an insurmountable expense,” he said.

Kleynhans added that the move effectively penalises households for their efforts to reduce electricity consumption.

Julia Fish, manager at Outa’s JoburgCAN initiative, added that the move was poorly publicised and badly implemented.

“Despite multiple requests for information on the number of households on the City’s indigent register who are exempt from the fee, the City has not responded,” she said.

She said the charge effectively increases electricity costs for low-consumption households by more than 100%.

Despite the outcry, the Joburg power utility has stood firm. In late July 2024, City Power board chair Bonolo Ramokhele warned that the city’s electrical infrastructure would collapse if it scrapped the charge.

“We must maintain the lines, substations, you name it and if we don’t invest in infrastructure, it will crumble and create a much bigger problem for all of us,” he said.

The metro had also factored receiving the R200 surcharge from prepaid customers into its budget for the 2023/24 financial year.

It passed a budget of R83 billion through its funding model and warned that scrapping the fee would create financial problems for the City of Johannesburg.

Electricity and Energy Minister Kgosientsho Ramokgopa came to City Power’s defence, saying municipalities are forced to raise tariffs to maintain their infrastructure.

“We did warn a few years ago that at the rate of perennial underinvestment in relation to municipal distribution infrastructure, you are likely going to hit a snag sometime down the line,” the minister said.

“With the gradual erosion of the municipal revenue base as a result of the underperformance of the economy, we are seeing that they are investing less and less on the replenishment and maintenance of that infrastructure.”

However, he warned that the trend could lead to “energy poverty”, when power is available through the grid, but poorer households can’t afford to access it.

“They must choose whether to reload the units on prepaid or buy bread or pay school fees. Those are difficult choices,” said Ramokgopa.