Durban residents could soon be facing additional charges for electricity after the eThekwini Municipality proposed to subject them to extra fees for the infrastructure connected to their homes.
The proposed charge is for network and infrastructure and will be applied regardless of whether or not the customer has used electricity. This proposal is part of the electricity reform strategy tabled by the city, aimed at addressing the performance of the electricity unit.
The City revealed on Tuesday that if the proposal is adopted, the municipality will charge separately for energy consumption and for infrastructure with both charges included in the electricity bill. However, it is not immediately clear how this will be handled for customers using prepaid electricity meters.
It was also not immediately clear how the network and infrastructure charge would be calculated.
The proposal has not been welcomed by ratepayers who told The Mercury that they will challenge it.
The municipality has been asked to produce reform proposals to address the shortcomings of the electricity unit, as demanded by the National Treasury, which is concerned about the performance of electricity units across the country.
The reform plans were tabled during the executive committee meeting on Tuesday, but no decisions were made. The committee is scheduled to meet again this morning ahead of a special council meeting to pass the reforms.
The reforms must be approved on Wednesday and submitted to the National Treasury by Thursday. Failure to do so could result in the municipality losing millions of rand in grant funding. Grant funding would allow it to make significant investments in its electricity infrastructure.
Speaking on the plan, acting head of electricity, Veer Ramnarain, said there have long been calls for the City to split its tariff structure.
He noted that the City was already doing this for industrial customers, but this had not yet been extended to domestic users.
Regarding the reform strategy, he said it was initiated by the National Treasury almost two years ago. The Treasury realised that the trading services function in most municipalities across the country was not on a sustainable path and had engaged water services to institute reforms. They are now addressing electricity which will be followed by sanitation.
The acting head explained that electricity sales in the city have taken a dive over the past the few years due to various factors, including load shedding and customers moving off the grid.
He said this situation had been concerning to the National Treasury, which believed that the current structure lacked sustainability.
The financial picture of the unit in eThekwini, said Ramnarain, shows how dire the situation was.
“About ten years ago, the unit used to generate about R800 million in surplus; half of it went to the City’s corporate functions, and half went to the electricity unit's capital reserve fund.
“Currently, the City is facing a deficit for the past few years, with the latest figures suggesting it is sitting on a deficit of R500 million for the 2023/24 financial year. From making a R800 million surplus ten years ago to a R500 million deficit, it’s a very worrying picture,” he added.
The operational metrics also indicated a steady decline in new applications for electricity.
“It means there are fewer and fewer new customers coming to us. Our network is not performing. Ten years ago, we used to do 15 000 connections per year, and last year we only did 3 000 connections.”
He noted that the City, along with many other municipalities, was caught in a negative loop, as they were investing less in the network, causing it to be unreliable and driving customers away.
“One of the biggest challenges we have is revenue generation from our energy sales. The way our tariffs are structured means that for the vast majority of customers, except for industrial customers, if you do not use electricity, there is no other revenue we can generate from you,” he said.
“We must split the tariffs to have a fixed network charge. As long as there is a network connected to your home, that network needs to be maintained, which means customers have to pay for it,” said Ramnarain.
He said as part of the reform strategy, the electricity unit should be a ring-fenced unit within the municipality, essentially giving the unit its own resources and the power to manage its own affairs.
Ramnarain said while tackling the reform strategy would allow the city to qualify for the grant, they still need to deliver on the reforms as consistent failure to do so could push the city into debt because the grant would be converted to an interest-bearing loan.
DA councillor, Thabani Mthethwa, expressed concern about how customers would be charged while they were not using electricity.
Durban mayor Cyril Xaba described the reform strategy as a serious matter that needed to be handled with care.
Ish Prahladh of the eThekwini Ratepayers’ and Residents’ Association said, the proposal is wrong.
He said the city has struggled to provide electricity for years and and now that consumers have sought alternative sources of energy, they are trying to stop that. “We will challenge this,” he said.
The Mercury