Electricity rebates

Johan van der Merwe, mayoral committee member for finance, City of Cape Town

Those who qualify for a pensioners’ rebate (residents of pension age with total household income under R15 000 per month) do not have to live in a property worth less than R400 000 in order to get access to the Lifeline Tariff (“Electricity tariffs are unfair,” Northern News, August 23).

They must, however, use less than 450 units per month on average. If Mr Richardson falls into this category, he should please visit his nearest municipal cash office to apply.

This application will need to be renewed every three years.

Furthermore, lower tariffs in Kalbaskraal do not indicate a high mark-up on electricity by the City of Cape Town, but rather that Kalbaskraal residential tariffs are subsidised.

One must remember that each supplier will have a different mix of industrial/commercial/residential customers, and as such will have different levels of cross-subsidisation across these categories (and within categories as well).

Eskom sells a bigger proportion of electricity to their large commercial and industrial customers than the City of Cape Town, and hence they are able to provide greater subsidy to residential customers without stifling the economy with high business/commercial tariffs.

Further to this, small municipalities have lower infrastructure/maintenance costs. There is no profit on the sale of electricity, and no revenue from electricity is used in the provision of water and sanitation.

Bulk energy purchases from Eskom by the City of Cape Town should amount to R8.094 billion for the 2016/17 financial year, while R12.6 billion is to be recovered from sales.

The mark-up is, for the most, part made up of the cost required in order to operate and maintain our network infrastructure.

The City also includes a 10% contribution to the rates account in its electricity tariffs in order to subsidise other services.

This ensures that those who otherwise would not contribute towards rates-funded services (libraries/parks/clinics/roads,etc.) do in fact do so. Without this subsidy, the amount for property rates charged would have to increase by substantially more than 10% to sustain service levels.