municipal tariff study

Municipal Tariff Study

2

Contents

1. Scope of Study2. Issues Raised3. Methodology4. NERSA vs. Municipal Tariffs5. Municipal margins6. Conclusions

Scope of Study

• The study is not to show cheapest or most expensive tariff.• The work to date has been to develop an agreed upon

methodology to compare dissimilar tariffs with a minimum of bias.

• The current work has focused on establishing the current state of affairs and highlighting trends.

3

Issues Raised

1. Municipal tariffs are not sustainable.i. Municipal tariffs are increasing at greater rates than

Eskom.ii. Municipal tariffs are being changed to focus on fixed

charges.iii. Municipalities are padding tariffs with non standard

charges.2. Municipal tariffs are out of kilter with NERSA approval

tariffs.

4

5

Methodology

• Data was collected from NERSA and published municipality tariff booklets.

• Anonymous sample data was collected from various contributors to provide user profiles.

Tariff Universe

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2746 Tariffs 187 Licensees

Tariffs

Load Heavy Tariff (kWh & kVA)

TOU

Energy ChargeWinter PSOSummer PSO

Demand ChargeWinter MDSummer MD

Fixed ChargeNACFixed

Licensees

2012/132011/122010/11

• There are certain tariff elements that are common

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NERSA vs. Municipal Tariffs

UNITS

Energy Component Peak 12 300 000

Standard 30 000 000

Off-Peak 37 800 000

Demand Component 121 000

Network Access Charge 165 000

Total 80 386 000

11kV User Profile for full 2011/12 year

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NERSA vs. Municipal Tariffs

9

NERSA vs. Municipal Tariffs

10

NERSA vs. Municipal Tariffs

11

NERSA vs. Municipal Tariffs

12

NERSA vs. Municipal Tariffs

NERSA vs. Municipal Tariffs

• The published tariff booklets for municipalities are inline with NERSA approved tariffs. The true reflection of what is actually being charged is however often understated due to non-standard charges.

• NERSA account for the categories of an energy charge, an energy demand charge and a fixed charge. They do not take into account any additional levies or surcharges that municipalities charge.

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14

Municipal margins

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Margin change YoYBu

ffalo

City

City

of C

ape

Tow

n

City

of T

shw

ane

City

Of U

mhl

athu

ze

City

Pow

er

Ekur

hule

ni

Emfu

leni

eThe

kwin

i

Nel

son

Man

dela

Bay

Tlok

we

3% 2%

4%

9%

5%4%

5%6%

7%

0%

11 kV, 22kV, 33kV, 44kV, 66kV ≤ 300km Time of UseYoY % change Aggregate municipal published active energy charge

above / below Eskom Megaflex

16

Municipal margins

17

Margin change YoYB

uff

alo

Cit

y

Cit

y o

f C

ap

e T

ow

n

Cit

y o

f T

shw

an

e

Cit

y O

f U

mh

lath

uze

Cit

y P

ow

er

Ek

urh

ule

ni

Em

fule

ni

eT

he

kw

ini

Ne

lso

n M

an

de

la B

ay

Tlo

kw

e

-20%

-25%

-11%

0%

14%

-10%

8%

-40%

6%

0%

11 kV, 22kV, 33kV, 44kV, 66kV ≤ 300km Time of UseYoY % change Aggregate municipal published energy demand charge

above / below Eskom Megaflex

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Sustainability

• Municipalities tariffs are not conducive to the competitiveness of industrial customers.

• While margins are highest for demand charges and are still considered the driver of consumer behaviour, some municipalities are realising that their current margins on energy demand is not sustainable.

• The YoY percentage change indicates for the period July 2011 till June 2012, in terms of percentage increases/decreases, the energy purchase cost actually increased while demand costs declined in relative terms.

• There is thus clear indication that a trend exists towards pacing a higher emphasis on energy cost.

Conclusions

1. Municipal tariffs are not sustainable. i. There is an indication that there is a shift towards

placing a stronger weight on energy for electricity purchased going forwards.

ii. Municipal tariffs are still increasing above that of Eskom but the rate of the increases is slowing. Consensus must be achieved on determining a fair mark-up between municipalities and their customers.

iii. Municipalities are padding tariffs with non standard charges.

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Conclusions

• There are differences in accounting calculations between NERSA and the municipalities. The regulation of the catch all categories of energy, demand and fixed charges is insufficient and does not provide a true reflection of the supplementary charges being imposed by the municipalities.