It has been a week since the implementation of a R200 monthly fixed charge by City Power, and poorer residents are already feeling it hit their pockets. The hike and surcharge now face not only pushback, but also possible litigation.
The monthly fixed charge came into effect on 1 July, along with the 12.7% electricity hike that has left many residents in a tight financial position. Both the hike and surcharge were approved by the National Energy Regulator of South Africa (Nersa) following City Power’s application.
The fixed rate is intended to provide revenue to fund Johannesburg’s investment into new electricity infrastructure and the maintenance of existing infrastructure. Before 1 July, prepaid residential customers did not contribute to these costs, only post-paid customers.
While R200 may seem a small sum to middle- or high-income earners, for millions of Joburg’s poor and unemployed residents it means going a week without a meal.
This is the case for mother of two, Witney Phiri of Pimville, Soweto, who survives on R1,060 a month in child social grants – almost half of it goes towards buying electricity.
In an average month, Phiri spent R450 on electricity, which would give her 130 units of electricity. She got the shock of her life when she made the same purchase on 3 July, but was given only 49 units, which will last just a week and a half.
“I thought there was a mistake, when I went to inquire I was told of the hike and the R200. How could they do that when we are already struggling?”
In a week’s time, Phiri will have to make a difficult choice of either buying more electricity to keep the lights on or buying food. With R200, Phiri can purchase just the basics – 5kg maize meal, 2kg chicken portions and vegetables, which she and her children consume for a week.
Meanwhile in Eldorado Park, Renè Brown echoed similar sentiments. Like Phiri, she was neither aware of the electricity hike and the R200 surcharge nor of what it meant.
Although she had not yet purchased electricity for July, she was fearful of what was to come.
“People are really angry about being charged so much; we are already struggling to buy electricity. How are we going to survive now?”
Brown is a pensioner and is dependent on her two employed daughters, who often complain about the rising cost of electricity.
“I thought our neighbours were selfish for bypassing meters and buying ghost units, but it looks like we will all have to do it if things do not change, otherwise it will get worse from here,” Brown said.
Both Pimville and Eldorado Park townships are notorious for violent protests, including over water and electricity issues. The areas have also seen an increase in the number of bypasses to electricity meters and illegal connections.
On Friday, City Power disconnected more than 15 spaza shops in Eldorado Park that were found to have bypassed electricity meters.
Teething problems
Barely a week after the introduction of the new tariff, scores of City Power customers took to social media to express frustration over billing issues.
City Power then issued a notice to customers indicating that electricity rates for some residential customers have been charged using business tariffs instead of residential tariffs from 1 July.
“This erroneous classification may have been caused by the fact that some customers registered their accounts using business or trust names. We are also investigating our internal systems, and this has been rectified internally,” spokesperson Isaac Mangena said.
In June 2024, Daily Maverick reported that on average, indigent households use about 200kWh of electricity a month, and from 1 July, such households would face a price increase of about 60% for this very low amount of electricity. Poor households using 300kWh of electricity a month face an increase of 45%.
Read more in Daily Maverick: Joburg’s indigent households set to be hammered with electricity price rises
The new tariff and surcharge apply to all prepaid residents except the “indigent”, which is used to classify customers earning less than R6,000 a month or who have financial challenges and are registered as such in the city’s database.
It however remains unclear how many residents are registered.
According to the equitable share grant from the National Treasury to the City of Johannesburg for free basic electricity, there are about 950,000 indigent households in the City of Johannesburg metropolitan area that should be receiving free basic electricity.
The City of Johannesburg’s data shows that about 670,000 households live below the lower-bound poverty line. However, self-reported data by the city in the annual Stats SA non-financial census of municipalities indicates that just under 30,000 indigent households are on the Indigent Register to receive free basic electricity.
This means that some 95-97% of all indigent households in the Johannesburg metropolitan municipal area are not on the city’s Indigent Register, and therefore, the residential prepaid high tariff applies, according to energy expert Chris Yelland.
How do customers pay the surcharge?
City Power has indicated that qualifying prepaid customers will be charged using the prepayment platform. This implies that when a customer purchases electricity, the R200 will be recovered upfront before any consumption-related charges.
“However, should the customer at the beginning of the month purchase electricity for less than R400, the payment will be split between covering the fixed charge and charges for consumption of electricity to ensure that the customer gets some kWh with every purchase until the minimum purchase threshold of R400 is reached,” Mangena said.
Those who opt not to purchase electricity altogether will then accumulate a monthly bill of R200 and be required to pay for all the outstanding months, according to City Power’s utility’s general manager for pricing and tariffs, Frank Hinda.
Following the hike and subsequent R200 surcharge, the Democratic Alliance’s Joburg caucus leader Belinda Kayser-Echeozonjoku wrote to the city’s finance MMC, Dada Morero, to ask him to urgently review or do away with the electricity tariff surcharge and provide clarity on the business surcharge and how it will be used for the benefit of residents.
Ward councillors have been inundated with queries from residents to which they could not provide answers.
Kayser-Echeozonjoku said: “I am requesting that the city urgently review and possibly do away with this surcharge on top of the increase as the 12.7% already is quite a hefty increase for residents who are battling with outages, despite there being no load shedding amid a water crisis.”
‘Double charge’
Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage said: “If you recall, we raised this concern on record in council and advised that this surcharge can almost be viewed as a double charge.”
Outa has contacted the city to ask whether it understood the negative consequences of the levy and asked for the costing application to Nersa.
The organisation will now assess how to challenge the decision. “We must now consider the next steps and potential remedies at our disposal to address this problem,” Duvenage said.
Leader of ActionSA’s caucus in Johannesburg, Nobuhle Mthembu, expressed unhappiness with the policy, which she said her party would endeavour to bring to an end at the next council meeting.
“ActionSA will return to the next council sitting with the sole aim of rescinding this decision and sending City Power back to the drawing board to explore other available means to collect its revenue.”
Should the party succeed in bringing the motion to debate and vote on the policy in council, it is unlikely to pass as ActionSA and the DA do not have the necessary majority.
Mthembu did not rule out the possibility of taking the legal route should the party not get its way through council processes.
“We strongly believe that while City Power must recover its revenue from defaulting residents, the same approach should be applied to certain provincial departments that have defaulted on their payments in the past, including the departments of Education, Health, Housing, Infrastructure Development and Transport,” she said.
The city’s executive mayor, Kabelo Gwamanda, said the R200 surcharge would remain in place.
“The new electricity surcharge is a necessary intervention to create fairness and equality in the city’s tariffs regime. Post-paid customers have been paying the surcharge and only prepaid customers were excluded. What the introduction of the surcharge now seeks to do is to end the unfair subsidisation of prepaid customers by post-paid customers,” Gwamanda said.
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The mayor slammed the DA for criticising what he said had been a sensitive issue.
“Any attempt to sabotage this critical intervention is an attempt to deliberately collapse the city’s infrastructure and to maintain the injustice of creating a two-tier tariff dispensation where post-paid customers pay and prepaid customers don’t. The split between post-paid and prepaid customers in the city is approximately 50:50, and as such we cannot with good conscience disadvantage one customer base in the interests of the other,” Gwamanda said.
Outa’s manager for local government, Julius Kleynhans, has since called for the scrapping of the R200 surcharge.
“Outa believes this charge will have significant financial repercussions on our communities, especially those who are most vulnerable. It must be scrapped,” Kleynhans said.
Although the fee is intended to provide revenue to fund the city’s investment in new electricity infrastructure and for the maintenance of existing infrastructure, Kleynhans said the city should implement reasonable tariffs while ensuring that it ran cost-effectively. “It cannot pass costs on to consumers due to its own inefficiencies that it consistently fails to address, such as inadequate debt collection of conventional electricity tariffs and high electricity losses.”
While residents have told Daily Maverick they were unaware of the new hikes, Gwamanda maintained that due process had been followed and the city had consulted with residents “comprehensively” through the Integrated Development Plan (IDP) consultative process in all wards before the new tariff was approved.
“Equally and as expected, there has been some opposition to the surcharge; however, as a responsible government, the city must ensure it optimally uses tariffs to maintain the system and to increase its capacity to meet the growing population and increasing economic needs of the city,” Gwamanda said.
Outa has since identified several repercussions of the service charge on poor communities:
- Increased financial strain: many low-income families are already living hand-to-mouth. The additional R230 charge, including VAT, will force them to make tough choices between essential needs like food, healthcare and electricity. This could lead to a significant decrease in their quality of life and wellbeing;
- Higher risk of electricity disconnections: as households struggle to afford the new charge, we can expect a rise in electricity poverty. This will leave many families without power, affecting their ability to cook, heat their homes and provide a safe environment for their children;
- Encouraging illegal connections: the service charge might drive some residents to seek illegal electricity connections as a desperate measure to avoid the additional costs. This not only poses safety risks, but also exacerbates the problem of non-payment and revenue losses for City Power;
- Deepening inequality: the service charge disproportionately affects the poorest members of our society, deepening the divide between wealthy and impoverished communities. This move contradicts the city’s claimed commitment to social justice and equitable development;
- Civil unrest: the levy risks creating unrest among communities due to social pressures which can result in rioting and protest action. Businesses who sell prepaid electricity tokens risk being vandalised or confronted by consumers due to the lack of public awareness and the lack of explanation or consideration by the city regarding the service charge; and
- Unclear tariffs: the city’s final tariff document (see here) makes it clear that the Prepaid High Usage tariff charges customers more per kilowatt hour than customers on post-paid (conventional) meters, which was presumably designed to cover the lack of a service charge. A household on the Prepaid Low Usage presumably registered indigents, although the city tariffs do not explain this. DM
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