South Africa’s national energy regulator Nersa is preparing to block plans by Buffalo City municipality in the Eastern Cape to increase electricity tariffs by 8.5 per cent, instead of the approved 7.39 per cent, according to a report on Moneyweb.

At a recent meeting of Nersa’s electricity sub-committee, it was decided to get legal opinion on the possibility of getting a court order to stop Buffalo City from implementing the unauthorised tariffs until such time that the dispute could be resolved, either by a tribunal constituted by Nersa in terms of the Electricity Act or by approaching court directly.

Buffalo City’s defiance over fixed tariffs, which Nersa deems “combative”, is unprecedented and could open the door for other municipalities to do the same.

Impact on industry

The municipal council has defended the move by saying the difference between the 7.39 per cent and 8.5 per cent tariffs will be ring fenced and used for its capital infrastructure programme.

However, Nersa has limited the increase after previous complaints from the business community – including a Mercedes-Benz plant producing the C-Class model – that the high cost of electricity is detrimental to business and that funds weren’t being spent on infrastructure projects.

Les Holbrook, executive director of the Border-Kei Chamber of Business (BKCOB), said he has written to Nersa to object to any increase over and above the guideline. “Last year Buffalo City got 10 per cent (which was above the guideline), but did not apply the extra revenue as they promised on infrastructure maintenance.”

Mr Holbrook said Buffalo City is becoming the most expensive metro in the country and its tariffs are way above that of Port Elizabeth, which is often used as a benchmark.

Municipality electricity debts

Meanwhile, it’s been revealed that municipalities across South Africa owe Eskom around ZAR10 billion in arrears, according to a statement from Mkhuleko Hlengwa, MP and spokesperson on Cooperative Governance and Traditional Affairs for the Inkatha Freedom Party.

Mr Hlengwa said: “In response to my question on how much money is owed to Eskom by municipalities up to the end of June 2014, the Minister of Cooperative Governance and Traditional Affairs, Pravin Gordhan MP, has revealed shocking and worrisome figures.”

Buffalo City Metro is believed to owe Eskom ZAR128 million, while City Power of the City of Johannesburg has arrears of ZAR1.075bn and the City of Cape Town Metropolitan has debts of ZAR873m.

Hlengwa repeated allegations that municipalities are diverting revenue collected from electricity rates to other programmes and projects instead of paying off debts due to Eskom.

Hlengwa said: “This narrow-minded financial practice of robbing Peter to pay Paul is going to collapse both municipalities and Eskom at the expense of citizens who in turn bear the brutal brunt of these glaring failures.

“We urge the Minister to ensure that the arrangements in place to have municipalities settle their Eskom debts by March 2015 materialise.”