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Clarification of residential prepaid tariff increase

City Power has suspended the implementation of a fixed prepaid surcharge of R200 for residential prepaid and R402 for business prepaid due to further consultations with both internal and external stakeholders.

The MMC of Finance Cllr Funzela Ngobeni has indicated in a statement put out earlier that this surcharge was supposed to have been implemented from July 2019.

The reason City Power wanted to implement the surcharge was that it was adopted by City of Johannesburg Council to address the anomaly between prepaid tariffs and conventional tariffs.

The gap between prepaid tariff and conventional tariff is caused by basic charges levied on conventional customers over and above electricity tariff.

A prepaid customer does not pay basic charges but pays only the tariff, therefore electricity is cheaper for a prepaid customer compared to a conventional customer hence the City of Johannesburg wanted to address the disparity.

City Power has taken a decision to implement the reduction of Residential Prepaid blocks from five to three during the financial year  2019/20 tariff cycle as part of a process of alignment between the conventional and prepaid tariffs, as there is an anomaly in the manner in which the prepaid tariffs are currently structured.

Due to this anomaly the residential prepaid tariff was historically cheaper than the conventional tariff.

The conventional tariff includes basic charges such as service and capacity charges. These charges cover the operational, maintenance and refurbishment costs of the electricity infrastructure to ensure that the electricity is available on demand by the customers.

The residential prepaid customers do not contribute towards these costs as a result the residential prepaid customer therefore does not adequately contribute to operational, maintenance and refurbishment costs of the electricity infrastructure to ensure continued availability of electricity supply on demand.

The residential prepaid customer has the benefit of having electricity availability on demand while not paying for it.

This is the anomaly the City of Johannesburg seeks to eradicate so as to equalize the costs between a residential prepaid customer and a residential postpaid customer.

Envisaged introduction of Prepaid Network Surcharge delayed.

The envisaged introduction of prepaid network surcharge was intended to further enable the prepaid customer to start to make adequate contribution to the cost of supply of electricity.

The general intended advantage for a customer to be on prepaid tariff is to give a customer added ability to manage their electricity consumption more efficiently than otherwise as the customer has some ability to optimize electricity usage proactively.

The introduction of the prepaid network surcharge was however, deferred to allow further consultation with City Power both internally and externally with their customers and stakeholders on how best to achieve further alignment between a prepaid and conventional consumption and in what time frames.

Average increase of 13.07% for the average customer

The residential prepaid tariff for FY 2019/20 was designed in a way that the prepaid customer with the average consumption level of 374kWh/month to, on average, experience an increase of 13.07% which is the NERSA approved benchmark increase for municipalities and municipal entities.

However, because of the reduction in the number blocks customers will experience different increase depending on the level of consumption i.e. customers with average monthly consumption below 374kWh will experience lower than benchmark average increase in tariffs while those with higher than average consumption will invariably experience higher than average increase in tariffs.

This is mainly because the sizes of the blocks have changed. It is therefore not true that the previous block 1 is equal to the current block 1 and the current block 2 is not similar to the current block 2.

For a case in point a customer consuming less than or equals to 350kWh per month will experience only 12.0% average increase in the tariff.

A customer who consumes say 500kwh per month will experience an average increase that is a combination of the impact of the new block 1 and block 2, which in this case will be 16.94% and not 28.84%.

It is therefore in the nature of the FY 2019/20 Prepaid tariff design that customers will experience different levels of tariff increase depending on a particular customer’s actual average consumption and that customers with higher actual average consumption will experience increases above the guideline increase of 13.07% as can be seen in Table 1 below.

With an average tariff increase of 13.07% City Power has ensured that the increase has not impacted negatively on the average consumer as City Power is a utility that is pro-poor.

City Power through the City of Johannesburg will continue to ensure that free electricity is available to indigent customers through Expanded Social Package (ESP). “Our indigent customers are encouraged to

City Power has suspended the implementation of a fixed prepaid surcharge of R200 for residential prepaid and R402 for business prepaid due to further consultations with both internal and external stakeholders.

The MMC of Finance Cllr Funzela Ngobeni has indicated in a statement put out earlier that this surcharge was supposed to have been implemented from July 2019.

The reason City Power wanted to implement the surcharge was that it was adopted by City of Johannesburg Council to address the anomaly between prepaid tariffs and conventional tariffs.

The gap between prepaid tariff and conventional tariff is caused by basic charges levied on conventional customers over and above electricity tariff.

A prepaid customer does not pay basic charges but pays only the tariff, therefore electricity is cheaper for a prepaid customer compared to a conventional customer hence the City of Johannesburg wanted to address the disparity.

City Power has taken a decision to implement the reduction of Residential Prepaid blocks from five to three during the financial year  2019/20 tariff cycle as part of a process of alignment between the conventional and prepaid tariffs, as there is an anomaly in the manner in which the prepaid tariffs are currently structured.

Due to this anomaly the residential prepaid tariff was historically cheaper than the conventional tariff.

The conventional tariff includes basic charges such as service and capacity charges. These charges cover the operational, maintenance and refurbishment costs of the electricity infrastructure to ensure that the electricity is available on demand by the customers.

The residential prepaid customers do not contribute towards these costs as a result the residential prepaid customer therefore does not adequately contribute to operational, maintenance and refurbishment costs of the electricity infrastructure to ensure continued availability of electricity supply on demand.

The residential prepaid customer has the benefit of having electricity availability on demand while not paying for it.

This is the anomaly the City of Johannesburg seeks to eradicate so as to equalize the costs between a residential prepaid customer and a residential postpaid customer.

Envisaged introduction of Prepaid Network Surcharge delayed.

The envisaged introduction of prepaid network surcharge was intended to further enable the prepaid customer to start to make adequate contribution to the cost of supply of electricity.

The general intended advantage for a customer to be on prepaid tariff is to give a customer added ability to manage their electricity consumption more efficiently than otherwise as the customer has some ability to optimize electricity usage proactively.

The introduction of the prepaid network surcharge was however, deferred to allow further consultation with City Power both internally and externally with their customers and stakeholders on how best to achieve further alignment between a prepaid and conventional consumption and in what time frames.

Average increase of 13.07% for the average customer

The residential prepaid tariff for FY 2019/20 was designed in a way that the prepaid customer with the average consumption level of 374kWh/month to, on average, experience an increase of 13.07% which is the NERSA approved benchmark increase for municipalities and municipal entities.

However, because of the reduction in the number blocks customers will experience different increase depending on the level of consumption i.e. customers with average monthly consumption below 374kWh will experience lower than benchmark average increase in tariffs while those with higher than average consumption will invariably experience higher than average increase in tariffs.

This is mainly because the sizes of the blocks have changed. It is therefore not true that the previous block 1 is equal to the current block 1 and the current block 2 is not similar to the current block 2.

For a case in point a customer consuming less than or equals to 350kWh per month will experience only 12.0% average increase in the tariff.

A customer who consumes say 500kwh per month will experience an average increase that is a combination of the impact of the new block 1 and block 2, which in this case will be 16.94% and not 28.84%.

It is therefore in the nature of the FY 2019/20 Prepaid tariff design that customers will experience different levels of tariff increase depending on a particular customer’s actual average consumption and that customers with higher actual average consumption will experience increases above the guideline increase of 13.07% as can be seen in Table 1 below.

With an average tariff increase of 13.07% City Power has ensured that the increase has not impacted negatively on the average consumer as City Power is a utility that is pro-poor.

City Power through the City of Johannesburg will continue to ensure that free electricity is available to indigent customers through Expanded Social Package (ESP). “Our indigent customers are encouraged to visit City of Johannesburg Customer Care Centre to be updated on how much free electricity they qualify for”, Isaac from city power.

visit City of Johannesburg Customer Care Centre to be updated on how much free electricity they qualify for”, Isaac from city power.

 

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