Consumers face shock 25% power price hike

BATTERED consumers in municipalities across the country could face a further shock 25 per cent hike in the price of electricity.

In a circular last week, the national treasury advised municipalities to factor in a 25% rise in the cost of purchasing electricity from Eskom in preparing their budgets, although it stressed that the National Electricity Regulator of South Africa (Nersa) had yet to rule on what increase it would award the power utility.

Last year, Eskom was awarded an increase of 36%, of which 30% was passed on by the Nelson Mandela Bay municipality to residents.

Indigent households which qualified for the council‘s Assistance To The Poor programme were handed a 14,2% increase.

Eskom needs the tariff increase to contribute to the financing of its capital expansion programme.

The circular warns local authorities that in considering changes in property rates they should “take cognisance of local economic conditions such as the downturn in the property market, trends in household incomes and unemployment. Excessive increases in property rates and other tariffs are likely to be counterproductive, resulting in high levels of non-payment and increased bad debts”.

The national treasury requires the municipalities to justify all increases in excess of the 6% upper inflation target of the Reserve Bank. The circular states that given the current economic crisis, municipalities will be faced with some “very tough decisions” when preparing their 2009/10 budgets, adding that they must give priority to:

Managing all revenue streams, especially debtors;

Protecting the poor from the worst impacts of the economic downturn;

Supporting local economic development initiatives “that foster micro and small business opportunities and job creation”;

Securing the health of their asset base in increasing spending on repairs and maintenance; and

Speeding up spending on capital projects funded by conditional grants.

“Municipalities must pay special attention to eliminating all unnecessary spending on nice-to-have items and non-essential activities,” the circular states, adding that Finance Minister Trevor Manuel had noted in his budget speech that there was “insufficient control of foreign travel, advertising and public relations activities as well as consulting services”.

With regard to the fuel levy allocation that will replace the regional services council levy that was halted in 2006, the circular states that the sharing of the general fuel levy will be regulated in terms of the Taxation Laws Amendment Bill. This piece of legislation is expected to be passed in September this year.

At that stage the specific allocation for each metro will be released, although information on provisional allocations will be given to metros this month to allow them to budget for the next financial year.

The amount allocated is based on fuel sales in each metro and the amount that Nelson Mandela Bay is expected to receive is not likely to differ dramatically from what it gained through regional services council levies.

source: The Herald

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