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Determining our service costs

Many residents have asked if the basic usage on a credit meter is at a total cost of X amount, what the same amount of usage will cost on a pre-paid meter.

The municipality renders a consolidated monthly municipal statement (account) to consumers, inclusive of all relevant charges for services, as might be applicable to a particular property.

Basic charge for electricity forms part of the electricity tariff structure, since the costs of service rendering for this service also have a large component representing overheads / fixed costs.

The basic charge must be associated with the fixed costs to render electricity services to the community, inclusive of capital costs for replacement of electricity infrastructure.

An infrastructure levy was implemented a number of years ago already, to be charged for the duration of the redemption period of this particular loan, in relation to a once-off loan taken up for upgrading of electricity network infrastructure.

It must be acknowledged that the whole of the Overstrand municipal area (1 708 km²) can to a large extent be regarded as a holiday destination, with a large number of holiday homes and still a substantial number of vacant erven with no improvements.

Taking into consideration that the basic charge is applicable on vacant erven as well, if the basic charge is considered too hefty, the result will be to lower the basic charge and to increase the price per unit consumed, and especially the permanent residents, will have to pay much more for consumption. Eskom vs Municipality

Please keep in mind that the municipality has to budget for adequate revenue to sustain rendering of electricity services to the community, based on setting tariffs, in support of the above.

The costing of this service includes, for example, a once-off payment to be made to Eskom within the next 12 months to the amount of R10 million, for purposes of an increased capacity allocation by Eskom to Gansbaai municipal area, to ensure that the municipality will be able to respond to demand.

This amount payable is determined by Eskom and is not negotiable. The municipality can surely not recover R10 million for this purpose from residents of Gansbaai area only?

So the principle applied in the determination of the cost of rendering the electricity service to residents across the Overstrand.

Interest and redemption on loans taken up or to be taken up, related to capital projects, for example, in a particular area during a particular budget year, can likewise, not be recovered from that area only.

This just serves as an example that the rendering of an electricity service to our community does not entail paying Eskom for units and calculating the profit that can possibly be added to this tariff, to enrich the municipality. The total operational costs in rendering the service must be recognised.

Our community needs to be aware of the fact that infrastructure network to the tune of R523,4 million (R1 billion before depreciation) must be maintained with regard to pro-active maintenance, largely to prevent power cuts as well as replacement and / or refurbishment /expansion of these networks to ensure our network does not regress to a near failure state.

Only technically qualified and competent municipal staff can work on the electricity network.

Over and above the basic charge, sliding-scale tariff sets (for credit meters and prepaid meters) were approved by the National Energy Regulator (NERSA) for purchasing of electricity units (please refer to the information in the table below, comparing two sets of tariffs, one for conventional (credit) meters and another set of tariffs for pre-paid meters.)

  • The basic charge increase from 1 July 2019, as approved by Nersa, is 15% while the usage increased with a lesser percentage.

On the other hand, payment for electricity consumed on a credit meter (with slightly more expensive tariffs) is received approximately 60 days later only, after the meter was read at the end of the period, the account being prepared and sent, with a further number of days’ leniency, up to due date by the 20th of the following month.

Sliding scales are applicable in both instances.

To view electricity tariffs for businesses, go to www.overstrand.gov.za; click on the tab for Strategic Documents then Budget, go to Annexure C (Rates and Tariffs).

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