The City of Cape Town is presenting its case before the North Gauteng High Court. The City seeks a review of the National Energy Regulator of South Africa’s (Nersa’s) recent tariff decisions.
Specifically, it argues that Nersa ignored detailed cost-of-supply studies when setting electricity tariffs for 2022/23 and 2023/24, as reported by Cape Business News.
Key Legal Concerns
The City highlights Nersa’s failure to comply with legal and regulatory standards. According to South African law, tariff approvals must be based on individual cost-of-supply analyses.
However, Nersa reportedly applied blanket tariff guidelines, treating all municipalities equally. This decision contradicted a 2021 High Court ruling, which mandated a case-by-case assessment.
Inequitable Tariff Increases
Cape Town claims it was treated unfairly compared to Eskom. For instance, in 2023/24, Eskom received an 18.5% tariff increase, while municipalities were capped at 15.1%. This discrepancy strained the City’s ability to manage rising costs.
Xanthea Limberg, the Mayoral Committee Member for Energy, stressed the impact. “Buying power from Eskom accounts for 75% of our costs. We cannot absorb massive double-digit increases while maintaining a reliable electricity service,” she explained.
Financial Consequences For Cape Town
If the City had followed Nersa’s tariff guidelines, it would have faced a R500 million shortfall in 2023/24 alone. Such a deficit could jeopardise critical services and infrastructure projects. To mitigate this, Cape Town absorbed R50 million of the Eskom increase. It passed a 17.6% tariff increase to customers.
Industrial and Urban Tariff Impact
Furthermore, the average increase across key industrial and urban tariffs is set at 13.29%. This rise is primarily attributed to the adjustment in the affordability subsidy charge, a component determined by Nersa.
For the 2024/25 period, local authority tariffs are set to increase by 12.72%. Eskom direct customers face a 12.74% rise across most charges, while the affordability subsidy charge will surge by 25.24%. This charge aims to support the Homelight 20A tariff, which helps offset historically lower increases for low-income households.
Structural Plans for Future Tariffs
Despite these adjustments, no structural changes are planned for the 2024/25 period. “There are no tariff structural changes for 2024/25,” Eskom stated. However, Eskom plans to propose a tariff restructuring for 2025/26, which Nersa will review.
Cape Town Investing in Future Sustainability
Despite these challenges, Cape Town is investing R4 billion over three years to modernise its energy grid. The City aims to reduce its reliance on Eskom by securing affordable power from alternative sources.
“We are focusing on long-term energy sustainability,” Limberg emphasised. “Our goal is to shield residents from Eskom’s escalating prices.”
Support for Vulnerable Households
Cape Town continues to support low-income households through its Lifeline electricity programme. This initiative offers significant subsidies and has the widest qualifying criteria in South Africa. For the 2024/25 financial year, Lifeline customers using 600 units a month will pay R113.94 less than they did in 2022/23.
Future Outlook
The City’s case against Nersa aims to create a fairer, more transparent tariff-setting process. It hopes this review will align tariffs with legal requirements and support sustainable municipal services.
Do You Think The City of Cape Town is Doing The Right Thing by Taking Nersa to Court?
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