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Municipal Tariff Study

This study examines the current state of municipal tariffs, highlighting sustainability issues and the increasing gap between municipal and NERSA-approved tariffs. It identifies trends, such as the shift towards fixed charges and non-standard fees, which complicate the validity of published tariffs. Through a rigorous methodology, this analysis provides insights into municipal margins, emphasizing that current tariff structures are unsustainable. A consensus on fair pricing is critical for ensuring competitiveness, especially for industrial customers, as municipalities struggle to balance their revenue needs with regulatory compliance.

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Municipal Tariff Study

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  1. Municipal Tariff Study

  2. Contents • Scope of Study • Issues Raised • Methodology • NERSA vs. Municipal Tariffs • Municipal margins • Conclusions

  3. Scope of Study • The study is not to show cheapest or most expensive tariff. • The work to date has been to develop an agreed upon methodology to compare dissimilar tariffs with a minimum of bias. • The current work has focused on establishing the current state of affairs and highlighting trends.

  4. Issues Raised • Municipal tariffs are not sustainable. • Municipal tariffs are increasing at greater rates than Eskom. • Municipal tariffs are being changed to focus on fixed charges. • Municipalities are padding tariffs with non standard charges. • Municipal tariffs are out of kilter with NERSA approval tariffs.

  5. Methodology • Data was collected from NERSA and published municipality tariff booklets. • Anonymous sample data was collected from various contributors to provide user profiles.

  6. Tariff Universe • There are certain tariff elements that are common

  7. NERSA vs. Municipal Tariffs

  8. NERSA vs. Municipal Tariffs

  9. NERSA vs. Municipal Tariffs

  10. NERSA vs. Municipal Tariffs

  11. NERSA vs. Municipal Tariffs

  12. NERSA vs. Municipal Tariffs

  13. NERSA vs. Municipal Tariffs • The published tariff booklets for municipalities are inline with NERSA approved tariffs. The true reflection of what is actually being charged is however often understated due to non-standard charges. • NERSA account for the categories of an energy charge, an energy demand charge and a fixed charge. They do not take into account any additional levies or surcharges that municipalities charge.

  14. Municipal margins

  15. Margin change YoY

  16. Municipal margins

  17. Margin change YoY

  18. Sustainability • Municipalities tariffs are not conducive to the competitiveness of industrial customers. • While margins are highest for demand charges and are still considered the driver of consumer behaviour, some municipalities are realising that their current margins on energy demand is not sustainable. • The YoY percentage change indicates for the period July 2011 till June 2012, in terms of percentage increases/decreases, the energy purchase cost actually increased while demand costs declined in relative terms. • There is thus clear indication that a trend exists towards pacing a higher emphasis on energy cost.

  19. Conclusions • Municipal tariffs are not sustainable. • There is an indication that there is a shift towards placing a stronger weight on energy for electricity purchased going forwards. • Municipal tariffs are still increasing above that of Eskom but the rate of the increases is slowing. Consensus must be achieved on determining a fair mark-up between municipalities and their customers. • Municipalities are padding tariffs with non standard charges.

  20. Conclusions • There are differences in accounting calculations between NERSA and the municipalities. The regulation of the catch all categories of energy, demand and fixed charges is insufficient and does not provide a true reflection of the supplementary charges being imposed by the municipalities.

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