City Power has gone back to the energy regulator to get permission to charge Joburg businesses 28 percent more for electricity.
The utility is disputing the National Energy Regulator of SA (Nersa) decision to cap the business price increases.
City Power wants to charge business conventional customers, large business and large businesses on time-of-use (TOU) tariffs an increase of 27.7 percent from July 1.
City Power is the City of Joburg's electricity utility.
Earlier this month, Nersa, which controls electricity prices, approved most of City Power's requests to apply a 22 percent increase on most of its tariffs, but refused the full increases on the business tariffs. City Power has appealed. Nersa has scheduled a public hearing on the application at its Pretoria head office on July 26.
The increase is for three types of tariffs: business conventional, large business, and large business timeof-use. TOU rates are higher in winter than in summer.
The good news for domestic users is that prepaid is now cheaper than last year. Joburg wanted to charge domestic prepaid users an average of 94.82c per kilowatt hour (kWh), but Nersa cut this to 88.75c/kWh.
This is also lower than the tariff that ran until the end of June, which was an average of 90.3c/kWh.
This tariff is a block tariff, so customers are charged higher rates for greater usage.
There were no comparisons available for the costs of each block.
Nersa provided costs for only the weighted average for the first 1 000kWh of usage, whereas Joburg has previously charged a higher rate for using more electricity each month than that.
The details of City Power's application for above-average business tariff increases are not available, as neither Nersa nor City Power will release them.
The City Power presentation to Nersa focused on the utility's planned spending.
The complexities of electricity pricing obscure the issue, making it difficult to compare the prices in City Power's 20010/11 tariffs to the tariffs it asked Nersa to approve for 2011/12, and the tariffs that Nersa did approve.
City Power says it's resubmitting its original application for reconsideration.
"City Power had initially applied for an increase of 22 percent, but has since revised its application to a 27.7 percent increase," Nersa said in the notice announcing the request yesterday.
"The reason for the resubmission is that what the city applied for was not approved by Nersa," said City Power spokesman Louis Pieterse. "It was very much the original application."
City Power says it needs the increase because of Eskom's high increases, but this does not explain why City Power needs to charge its customers more than all the other municipalities, which also buy their electricity from Eskom.
"The actual Eskom increase was 27.7 percent," reads part of the brief motivation for the increase released by Nersa.
Part of the Nersa deal in approving part of the increases earlier this month was that City Power must provide Nersa with maintenance reports every six months.
City Power wants commercial convention energy charges ranging from 109c/kWh for the summer low to 182c/kWh for the winter high; Nersa pegged these from 101c/kWh to 169c/kWh;
City Power wants R9 095 to R11 278 as the basic monthly charges for large power user timeof-use tariffs; Nersa pegged these at R7 707 to R9 557;
City Power wants energy charges for TOU tariffs of up to 206c/kWh in winter; Nersa stops at 180c/kWh.
City Power expects to spend R8.256 billion buying 13.839 gigawatt hours (GWh) of electricity in 2011/12. That's an average of 60c/kWh.
City Power's bulk electricity costs are 56c/kWh from Eskom to 106c/kWh from Kelvin power station, and 301c/kWh from gas turbines.
The utility told Nersa it wants to spend nearly R9bn over the next three years on capital projects.
This includes about R160 million on installing prepaid meters, replacing or fixing meters and installing vandal-proof locks.
Eskom's increases to the municipalities for the full Eskom financial year are loaded onto the municipal bills for nine months, because of the differences in the financial years. Nersa has calculated this means an increase in the municipalities' bulk electricity costs of 26.71 percent;
Nersa calculates that buying bulk electricity accounts for about 70 percent of the municipalities' electricity costs, and the rest of their costs (labour and maintenance) do not go up by as much. That means the municipalities don't have to increase their bills by as big a percentage as Eskom's increases;
Nersa calculated the municipalities could cover the Eskom increases and the lower increases in labour and maintenance by charging their customers 20.38 percent more.
City Power was one of 13 utilities and municipalities which applied to charge a bigger increase. City Power applied for a 22 percent increase; some municipalities asked for more.
The increase hits during winter, when many customers are using more power, and those who are on seasonal rates will be on the highest rates of the year;
The municipalities load the increase differently onto various tariffs, so that prepaid tariffs have smaller increases. That means some tariffs increase up to 35 percent.
Municipalities make money out of selling electricity services. In 2010/11, Joburg spent R6.420bn buying electricity and billed customers R8.859bn for it, a mark-up of 38 percent. The 2011/12 budget reflects the same 38 percent mark-up. In 2007/08, the mark-up was 49 percent. This does not reflect profit as the costs of staff and running the networks need to be taken into account.
