Brace for power hikes

Homeowners with properties valued over R1 million can soon expect to pay more than R240 extra a month for electricity before they’ve even switched on a light.

A new City of Cape Town tariff scheme proposes moving all domestic-tariff customers with houses valued at more than R1 million to the home-user tariff, which will see them hit with a daily R8.21 electricity service charge (R246 for a 30-day month), irrespective of whether they are at home or away.

The lifeline rate (with 60 kilowatt-hours free) for those using less than 450kWh will also be dropped for those with homes valued at R400 000 or more.

Also under the new scheme, people with homes valued at R400 000 or more will no longer get their first 6 kilolitres of water free, and Green Audits into Action (GAIA) has noted that the first 4.2kl of free sewage would also go under the new scheme. The tariff proposals have been out for public comment, the deadline for which was Friday April 21. They will now go before council, and, if approved, will come into effect on July 1, with the new electricity fee reflecting as a separate line item on the monthly rates bill.

The City says the new fee was introduced to cover the charge of maintaining the property’s service connection.

Johan van der Merwe, mayoral committee member for finance, said the cost of maintaining the service connection had previously been built into the unit cost of electricity and had only been fully recouped on properties using 600 kWh or more a month.

“Customers on the domestic tariff who use less than 600 units have therefore enjoyed a level of subsidy for many years, but the actual cost of providing the service was the same, whether usage was above or below 600 units,” he said.

Mr Van der Merwe said it had become clear to the City that the pricing model and structure of the tariff needed to be changed to reflect the cost of providing the service.

Under the new tariff structure, households using less than 250kWh a month will receive 60kWh free electricity, while households using more than 250kWh but less than 450kWh a month, will receive 25kWh of free electricity. This, however, only applies to properties valued at R400 000 or less.

At a Sub-council 7 meeting on Wednesday April 19, chairman Gerhard Fourie said they had received many comments on this issue.

Responding to questions from Northern News, Mr Van der Merwe said customers on the home-user tariff would pay 151.20c a kWh for the first 600 units and 234.44c a kWh for every unit thereafter, whereas domestic-tariff customers — those with properties valued at less than R1m — would pay 192.80c a KWh for the first 600 units and 234.44c a unit for every unit thereafter.

The City introduced its proposed 2017/2018 financial budget at various community meetings across the metro, giving residents an opportunity to comment on the budget. Mr Van der Merwe said all comments made during the public participation process would be considered, but the City had to make sure it could expand and maintain utilities infrastructure to meet demand.

“While the City is aware of the pressure on consumers, yearly tariff increases are unavoidable due to the rising operational, maintenance, costs of bulk electricity purchases from Eskom and the provision of capital investment in infrastructure for the future,” he said.

The Cape Chamber of Commerce has welcomed the draft budget proposals, which, it says, feature the lowest rates and tariff increases in a decade.

“We had a decade of above-inflation increases and we can only hope the new round of increases proves to be a turning point,” said Janine Myburgh, president of the Chamber.

Last year’s 6% increase in rates had proven to be below the eventual inflation rate and now there was a further reduction, to a five percent increase. “This is welcome, but it does little to wipe out the accumulated effects of a decade of savage rates and tariff increases,” she said.

While Sub-council 7 councillors questioned the number of properties that were valued under R400 000, Mr Van der Merwe said more than one-third of the formal properties on the City’s valuation roll were valued at less than R400 000, with those values based on market values as of August 1 2015.

“This is a substantial number. Keeping in mind that the City has managed to partially shield residents from the Eskom tariff increases for a number of years now, it is no longer sustainable to subsidise non-indigent residents with free electricity,” he said.

The City did not consider residents who owned property worth more than R400 000 as “financially vulnerable”.

However, various residents’ groups across the city have questioned that logic, saying many pensioners and young families live in homes valued at R1million or more, especially in rapidly gentrifying areas, where they originally paid far less for their homes.

One of those areas is Walmer Estate near the city centre, where Moosa Sydow, chairman of the local residents’ association, said: “Times are tough and everyone’s home in this area is valued at over R1m. Five or 10 years ago it was valued at R100 000. People have been living here for years and didn’t ask for their homes to be valued at millions.”

In circumstances such as these, an extra R240 a month could mean the difference between residents keeping or being forced to sell their homes.