Maintenance and the refurbishment of ageing infrastructure was a common motivation put forward by municipalities applying for tariff increases above the National Energy Regulator of South Africa (Nersa) guideline of 20.38% for 2011/12.

Nersa held public hearings on municipal tariff applications in Pretoria on Thursday.

City Power Johannesburg, which proposed an increase of 22%, said the average age of transmission infrastructure has reached 63% of its accepted useful life, and that it needed to build infrastructure to support major projects.

Current City Power Johannesburg demand reached 3.6 GW in 2010, and with an already additional 200 000 consumers added to its electricity grid, it expected future demand, excluding efficiency improvements and power saving strategies, would be in excess of 5.4 GW.

The City of Tshwane is asking for a 22.38% tariff increase.

Requiring some R76-million for refurbishments in its 2012/13 budget, Nelson Mandela Bay municipality, which had a backlog of some R122-million for refurbishment and bad debt, pushed for a 25.82% tariff increase.

The Eastern Cape municipality’s capital replacement reserve has depleted and the capital budget was reduced from R264-million to R61-million for the 2011/12 financial year, and R91-million for 2012/13.

“The municipality is experiencing an increase in faults, as well as network infrastructure that is aging and major refurbishment is required. This has become an area of great concern. Failure to address refurbishment and maintenance will severely limit the safe operation of the network and the ability to make provisions for future developments,” Nelson Mandela Bay’s Mvuleni Bukula said.

The Camdeboo municipality, which covers Nieu-Betshesda, Graaff-Reinet and Aberdeen in the Eastern Cape, also stressed the need for further infrastructure upgrades, along with the Sol Plaatje municipality, which experienced electricity losses of some 16% owing to poor infrastructure.

Sol Plaatje, in the Northern Cape, also said that it was competing with State-owned power utility Eskom, which provided power to users within the municipality’s boundaries.

The municipality, which applied for a 24.98% tariff increase, said that failure by Nersa to grant its increase compromised development, as well as restricted expansion programmes and the organisation's ability repay its debt. The maintenance budget for electricity infrastructure has been increased from about R5.2-million to R13.7-million.

“The municipality has been unable to fully exploit electricity provision licences as certain large power users are supplied by Eskom directly, and customers, such as diamond miner De Beers, are supplied at lower tariffs than the municipality’s cost price. This attributes to a huge reduction in our potential income,” Sol Plaatje acting CFO Zuziwe Mahloko said.

Nersa electricity subcommittee chairperson Thembani Bukula described the Sol Plaatje concern as “real in South Africa”. “We have to accept that some of the multinationals that have more than one operation in different municipalities would want to subscribe to a uniform tariff. However, each municipality needs to solve it in a way that best suits their situation,” he told Engineering News Online.

With regard to the inclining block tariff (IBT), he said Nersa would be assessing different municipalities during the year to try to understand their different customer profiles. The IBT would provide a framework for the cross-subsidisation of low-income domestic users.

“We have over 184 registered municipalities, and we hope to ensure that each municipality has an IBT that is fit-for-purpose, that there are no revenue losses and that there is a ‘cushioning system’ in place for those who consume less electricity.”

The consultation process is expected to be complete before year-end.

Officials from some of the municipalities said at the hearings that they would not be able to implement the IBT, and that in doing so, municipalities, such as Sol Plaatje, would not be able to move forward with expansion programmes.

The City of Tshwane would be implementing the IBT on the domestic tariff scale from July. For example, a resident who paid R350/kWh a month would now pay R405.91/kWh a month under the new tariff system.