Storm of protest brewing over City Power vs Eskom prepaid electricity tariff hike disparities

4 Jul 2024

There are about 950,000 indigent households in the City of Johannesburg metropolitan area that should be receiving free basic electricity.

A storm of protest is brewing after City Power raised its prepaid electricity prices to the majority of its indigent customers by six to 12 times the inflation rate, and well above Eskom’s prepaid tariff rates for the poor.

City Power is a company owned 100% by the City of Johannesburg, responsible for most of the electricity distribution and retail sales of electricity to residential customers in the Johannesburg metropolitan area.

However, for historical reasons, South Africa’s national electricity utility, Eskom, also distributes and sells electricity directly to certain residential households in the Johannesburg metropolitan area, and in particular, to customers in Soweto and other relatively poor townships, informal settlements and rural areas.

This article provides some facts and figures comparing City Power’s 2024/25 prepaid electricity tariffs and tariff increases to those of Eskom, focusing on the impact on indigent and poor households with relatively low consumption in the range of 200kWh to 400kWh per month.

Background

City Power’s Residential Prepaid Low tariff applies to households in areas served by City Power that are currently formally registered as indigent and appear on the indigent register of the City of Johannesburg. The Residential Prepaid High tariff applies to the significant majority of poor, indigent and other households with single-phase prepayment meters in areas served by City Power.

According to the equitable share grant from 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 own data shows that about 670,000 households live below the lower-bound poverty line. However, self-reported data by the City in the annual StatsSA non-financial census of municipalities further indicates that just under 30,000 indigent households are on the indigent register to receive free basic electricity.

This means that some 95 to 97% of all indigent households in the Johannesburg metropolitan area are in fact not on the indigent register of the City to receive free basic electricity, and therefore the Residential Prepaid High tariff applies, while only 3 to 5% of all indigent households qualify for the Residential Prepaid Low tariff and free basic electricity.

City Power residential single-phase prepaid electricity tariffs

City Power’s single-phase prepaid electricity tariffs for the 2023/24 financial year, and those approved by Nersa for the 2024/25 financial year commencing 1 July 2024, are shown in Table 1 below:

Eskom’s single-phase prepaid electricity tariffs for the 2023/24 financial year, and those approved by Nersa for the 2024/25 financial year, are shown in Table 2 below:

Comparison

From the above, it can be noted that for 2024/25, City Power’s prepaid electricity tariff rates for the very small minority of indigent households that are on the City’s indigent register (i.e. R2.55 and R3.12 per kWh), are 16% and 26% more expensive than Eskom’s prepaid electricity tariff rates (i.e. R2.19 and R2.48 per kWh, respectively).

A significant majority of City Power’s indigent and poor households are not on the City’s indigent register, and their prepaid electricity tariff rates (i.e. R2.72 and R3.12 per kWh) are 24% and 26%, respectively, more expensive than those of Eskom.

In addition, a fixed charge of R230 per month applies to a significant majority of City Power’s indigent and poor households that are not on the City’s indigent register, making things much more expensive.

On the other hand, Eskom’s prepaid electricity tariff rates are significantly lower than those of City Power, and apply to all indigent households in South Africa, whether or not they are on the indigent register, and there is no monthly fixed charge.

Only the small minority of indigent customers in the Johannesburg metropolitan area who are on the City’s indigent register receive the first 50kWh per month as free basic electricity from Eskom, and 100kWh per month from City Power, while a significant majority of indigent and poor customers do not receive any free basic electricity.

City Power prepaid electricity costs in 2024/25 compared with Eskom

For a significant majority of City Power’s indigent and poor customers with consumption in the range of 200 to 400kWh per month, that are not on the indigent register, City Power’s prepaid electricity prices are much higher than those of Eskom:

Eskom: For 200kWh per month: Cost = 200 x 2.19 = R438

City Power: For 200kWh per month: Cost = 230 + (200 x 2.72) = R774 (i.e. 76% higher)

Eskom: For 300kWh per month: Cost = 300 x 2.19 = R657

City Power: For 300kWh per month: Cost = 230 + (300 x 2.72) = R1,046 (i.e. 59% higher)

Eskom: For 400kWh per month: Cost = 400 x 2.48 = R992

City Power: For 400kWh per month: Cost = 230 + (400 x 3.12) = R1,478 (i.e. 49% higher)

City Power and Eskom prepaid electricity costs and increases in 2024/25 compared with last year

For a significant majority of City Power’s indigent and poor customers with consumption in the range of 200 to 400kWh per month, who are not on the indigent register, there has been a dramatic increase in the cost of prepaid electricity:

City Power 2023/24: For 200kWh per month: Cost = 200 x 2.41 = R482

City Power 2024/25: For 200kWh per month: Cost = 230 + (200 x 2.72) = R774 (i.e. 61% higher)

City Power 2023/24: For 300kWh per month: Cost = 300 x 2.41 = R723

City Power 2024/25: For 300kWh per month: Cost = 230 + (300 x 2.72) = R1,046 (i.e. 45% higher)

City Power 2023/24: For 400kWh per month: Cost = 400 x 2.77 = R1,108

City Power 2024/25: For 400kWh per month: Cost = 230 + (400 x 3.12) = R1,478 (i.e. 33% higher)

On the other hand, compared with last year, for the significant majority of Eskom’s indigent and poor households with consumption in the range of 200 to 400kWh per month, that are not on the indigent register, Eskom’s cost increase for prepaid electricity has been much lower than that of City Power:

Eskom 2023/24: For 200kWh per month: Cost = 200 x 1.94 = R388

Eskom 2024/25: For 200kWh per month: Cost = 200 x 2.19 = R438 (i.e. 13% higher)

Eskom 2023/24: For 300kWh per month: Cost = 300 x 1.94 = R582

Eskom 2024/25: For 300kWh per month: Cost = 300 x 2.19 = R657 (i.e. 13% higher)

Eskom 2023/24: For 400kWh per month: Cost = 400 x 2.20 = R880

Eskom 2024/25: For 400kWh per month: Cost = 400 x 2.48 = R992 (i.e. 13% higher)

Conclusions

As can be seen from the above, for the significant majority of indigent and poor households, City Power’s prepaid electricity prices are 76% to 49% higher than those of Eskom, in the range of consumption considered (i.e. 200kWh to 400kWh per month).

In addition, for the significant majority of indigent and poor households, City Power’s prepaid electricity price increases of 61% to 33% are 47 to 20 percentage points higher than those of Eskom, in the range of consumption considered (i.e. 200kWh to 400kWh per month).

It can also be seen that City Power’s prepaid electricity prices and price increases hit low consumption (usually poorer) prepaid electricity customers much harder than those with higher consumption.

In situations of extreme poverty and unemployment, such prepaid electricity prices and price increases, with significant disparities between those of City Power and Eskom, and between low consumption and higher consumption indigent and poor customers, all within the Johannesburg metropolitan area, are considered to be dangerous and may increase the risk of social unrest. DM

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