Watt’s the concern? Ratepayers sound alarm on electricity budget

Electricity management remains the primary concern of the business and ratepayer communities ahead of council’s budget adoption next week.

Uncurbed energy losses, a potential tariff shortfall and ratepayer funding of the indigent electricity policy were all flagged in submissions to the KwaDukuza municipality (KDM) during the budget process.

The draft budget was published after moving through council in March, and residents had a chance to have their say by making formal submissions to the municipal manager’s office.

Both the iLembe Chamber of Commerce and Dolphin Coast Residents and Ratepayers Association (Docrra) – the latter in conjunction with five other civic bodies – took the time to give in-depth feedback.

Concerns around electricity headlined both submissions.

“The municipality has incurred high costs of bulk electricity purchases over the previous years, far exceeding inflation, and this distorts the level of operating expenditure,” said iLembe Chamber CEO, Cobus Oelofse.

“Budgeted electricity revenue projections do not take into consideration the reduced consumption due to loadshedding, and are assuming continuity of levels of consumption with only tariff adjustments.”

It is also projected that increased adoption of renewables will cut into municipal electricity revenue going forward.

Docrra cited KDM’s functional electricity loss position (expenditure higher than revenue, rather than typical ‘energy losses’ caused by network failure, illegal connections etc.) over the last two years.

“The chance of this situation being reversed in 2025 is unlikely based on the fact that electricity losses have not been stemmed over the last three to five years,” said Docrra finance subcommittee chairman, Brian Botes.

“This is going to severely impact the future financial viability of KDM and will likely result in above inflationary increases, even above those of NERSA (the national energy regulator) increases to residents in the future.”

KDM’s energy losses for the 2023/24 year are expected to top R350-million if current loss rates continue through to the end of June.

That number blows past the R262-million in 2022/23 and R237-million the previous year, while also increasing percentage wise to a 26.5% loss level.

Elsewhere, KDM’s projected electricity tariff increase of 10.5%, which is lower than the regulator’s increase of 12.7%, was welcomed in some corners but there remain worries about how the shortfall will be made up.

The municipal indigent electricity provision was also questioned, given KDM had increased its free provision to qualifying households from 75 to 100kwh per month, with a further increase in 2025 proposed.

“This equated to a 33% increase, probably which wasn’t fully recovered from the Equitable Share Grant (a source of national funding for indigent provision),” said Botes.

“This meant that other residents and/or other revenue was used to subsidise this additional cost. Council should properly cost this in order to measure its impact on the financial result.”

In other sections of the budget, Docrra noted the property rates increase (5%) as below projected inflation of 5.4%, while the Chamber flagged the refuse increases for business of 9%.

“The proposed 9% increase to commercial customers is too high considering increases in previous years,” said Oelofse.

“It is not evident that the function has been reviewed for efficiencies as previously recommended. We recommend a cost review strategy going forward.”

The proposed refuse increase for residents is 7%. Following the public participation process last year, tariffs were lowered by 0.5% (property), 0.5% (refuse) and 3.55% (electricity).

The final budget for 2024/25 will be voted on in council next week.

Visit docrra.co.za/blog/ to find Docrra’s response in full and click here for the Chamber’s submission.

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