15 April 2013 – At the end of March 2013, the National Energy Regulator of South Africa (Nersa) decided that a guideline increase of 7% be approved for the 2013/14 municipal tariff review process. The guideline increase is based on the following assumptions: Bulk purchase prices have been increased by 7.3% in line with Eskom’s tariff increase to municipalities; a consumer price index (CPI) of 5.5%; salary and wage increases of CPI plus 1.25%; and repairs and maintenance, capital charges and other costs have been increased by the CPI.

Based on that guideline the block tariff average benchmarks are as follows: 0 − 50 kWh will have a tariff of 64-70c/kWh, 51 – 350 kWh will have a tariff of 82-87c/kWh, 351 − 600 kWh will have a tariff of 111-117c/kWh, and greater than 600 kWh will have a tariff of 133-138c/kWh. Commercial tariffs in the 2,000 kWh range will be 139-145c/kWh and industrial tariffs in the 43,800 kWh category will have tariffs of 152- 157c/kWh.

Nersa says that the Industrial Time of Use (TOU) tariff be benchmarked with the approved Eskom’s Megaflex tariff plus a maximum of 20%. Nersa acknowledges that municipalities should recover their costs from somewhere; e.g. demand charge, but is also mindful that these charges should not be excessive such that they do not incentivise the customers.

Municipalities are required to undertake a Cost of Supply (CoS) study in the 2013/14 financial year. This requirement is in line with the Electricity Pricing Policy (EPP). The study will assist municipalities to develop appropriate tariff structures and tariff levels to ensure sustainability and send the correct pricing signals to influence customer behaviour.

The costs deemed not to be in the direct supply of electricity will be dealt with on a case-by-case basis from each municipality. These will be determined by comparing the municipalities’ average cost to supply electricity to the average price charged by the municipalities. The difference will then be used to adjust the overall increase awarded to the municipality. In determining the average cost to supply the following, among others, will be taken into account; bulk purchases; bad debts; reasonable energy losses; salaries and wages; and capital charges.

Municipalities applying for an increase that is above the guideline will have to justify their increases to the energy regulator.