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It has been made public and final that Eskom has been approved a 31.3% increase in electricity tariffs from the 1st of July 2009. This is less than the 34% which Eskom asked for.
Eskom asked for an interim increase of 34% in tariffs until it finalizes its’ financing plans. However, the National Energy Regulator of South Africa (NERSA) approved only 31.3% at this time and also reduced the time to 9 months for this interim increase.
The decision for 31.3% constituted 25% increase that was project by NERSA in 2008 and 6.3% on inflationary count. The 6.3% inflationary count is lower than Eskom expected. When Eskom submitted the requested it calculated inflationary count at 9%. The increase itself is really 4 times higher than the current inflation rate; hence it stands to reason that both consumers and businesses are very unhappy about such a large increase.
That said it is to be remembered that some municipalities will put an additional markup in addition to these increases, which in effect makes the increase in tariffs even greater than the 31.3% which is only the increase that Eskom was approved.
The 31.3% also included 2 cents per kw/h environmental levy on non-renewable energy sources.
In summary Eskom had been approved 31.3% increase from the 1st of July, which is less than the 34% requested and also only for 9 months rather than the 12 months requested. That said if one is to add municipalities markup this 31.3% will be higher.
So what happens after the 9 months?
First of all Eskom has to finalize its’ funding model in its’ second
year price determination. This means they will have to submit this to
NERSA, media says probably by September. This will determine the price
increases form April 2010 till April 2012.
Generally speaking it stands to reason that there will be more
increases maybe not as high as the previous ones, but can’t be lower
than inflation rate either. Though there are no projections or
assumption into the future increases the media says NERSA expects the
increases to be higher than inflation rate.
For property landlords both in residential and commercials this
means that tenants will take more strain on cash flow and risk or
arrears is become even greater than before. Cash strapped tenants both
in residential and commercial need to plan carefully their expenses.
With the increases of electricity no one can afford anymore surprise
bills on post paid electricity .
It has become essential for landlords to help their tenants both in
residential and commercial to plan their electricity usage. The best
way to do this is really to have a monitoring system that enables the
tenants to check their usage and maybe change appliance that consume
too much electricity.
While being able to monitor usage on electricity with devices such
as prepaid meters, the tenants can actually pay less electricity and
start investing in long term electricity efficient appliances (e.g.
swap electricity heaters to gas heaters).
Just to give a small example; and old geyser consumes far more
electricity to heat up the water than a new one. On that same note
adding a timer to the geyser will reduce even further the usage of
electricity.
By reducing the usage with both cost effective devices and better
consumption habits some will actually manage to keep their electricity
bills as low as prior to the increases in tariffs while others will
mange to use less as to their budget and make sure such increases are
not effecting their cash flow as harshly as currently predicted.
Landlords themselves both in commercial and residential have to be
very weary now of arrears because any arrears that they used to
experience will increase from July 2009 by 31.3% or more on defaulting
tenants that do not or can not pay the electricity bills.
For landlord using prepaid metering systems is a simple solution to
avoiding arrears which they will be liable to pay in any case to the
municipality.
For more information on prepaid meters and metering solutions please visit: www.PrePaidMeters.co.za .
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