GOOD Statement by Brett Herron ,
GOOD Secretary General
4 December 2024
Today members of GOOD staged a silent picket outside the Gauteng North High Court in Pretoria as the City of Cape Town challenged NERSA’s refusal to approve the City’s electricity tariff applications for July 2022 and July 2023 financial years.
The City wanted to charge more than NERSA approved.
When NERSA denied their special application, they proceeded to charge more anyway.
Cape Town was not the only municipality to apply for electricity rates higher than those approved by NERSA. This is a process that is allowed. All other applications were also declined by NERSA.
Cape Town is the only applicant that refused to comply with NERSA”s decision and to go ahead anyway.
In Court the City is arguing that NERSA failed to consider the City’s projected drop in electricity sales due to load shedding and consumers going off the grid.
The drop in sales affected their ability to cover their “cost of supply” – to cover their costs – and “make a reasonable return” (read profit) and they argue that the City had no choice but to charge the higher tariff.
The case is important because it tests NERSA’s regulatory authority to determine a licensed distributor’s tariffs.
If NERSA’s authority can be defied, then what is to stop Eskom making the same claim of cost of supply and proceed to charge whatever it likes?
Likewise the same can be said for all municipalities that have distribution licenses.
The problem with the revenue crisis is that it is created by the City and National Treasury who have encouraged and incentivized consumers to go off grid.
It is expensive to go off grid. So while big businesses and the wealthy are not affected by this tariff battle, because they could afford to go solar. It is small businesses, middle-income and poor families who have been and will continue to carry the financial burden.
By our estimates, the City of Cape Town has overcharged consumers by at least R660 million.
In today’s opening argument counsel for the City confirmed their undertaking to “pay back the money” if the case was unsuccessful.
This is a very serious case of national interest.
It is surprising that the national government, the previous minister of energy and mineral resources in particular, did not intervene in the case given the potential impact on the electricity supply regime nationwide.
Clearly, the poor and middle-income consumers can’t be the ones to keep municipalities financially afloat while the wealthy enjoy electricity supply by solar panels and battery storage.
That is a financial burden too heavy to bear which will deepen inequality and reduce meaningful access to a basic service.
The financial model for local governments needs an urgent overhaul because increasingly it is the poor who must carry the costs of the city.
Media enquiries: media@forgood.org.za