National Energy Regulator of South Africa
Kulawula House 526
Madiba Street
Arcadia
PRETORIA
0083

By e-mail: municcomments@nersa.org.za

To whom it may concern

OPPOSE PLANNED 12,74% ELECTRICITY TARIFF INCREASE

I am currently residing within the Govan Mbeki Local Municipality. The municipality is applying for an average 12,74% tariff, which is more than the average 8,75% tariff increase that NERSA approved.

I hereby write this letter to oppose this increase and to set out the reasons for my opposition to this increase. The proposed average tariff increase of 12,74% appears unjustified when it is assessed against the municipality’s own cost of supply indicators and underlying cost drivers.

First, bulk electricity purchases account for approximately 60% of total expenditure, which makes this the dominant cost driver. However, Eskom-related cost pressures do not support the magnitude of the increase:

1. The municipality reflects a bulk purchase increase of 14% yet indicates that total cost increases are only 10% (including Eskom), or only 6% (excluding Eskom).
2. In many cases, Eskom increases are closer to around 8%, which is significantly lower than the 12,74% [GFdB1.1]average tariff increase that is being enforced on consumers.

This disconnection suggests that non-Eskom costs and/or inefficiencies are being passed on to consumers, rather than being managed internally.

Second, there are serious concerns regarding efficiency and data credibility:

1. Energy losses of 58% are extraordinarily high and far exceed acceptable NERSA benchmarks. This points to significant technical and/or non-technical losses (including theft and billing issues), which should not be recovered through higher tariffs without a clear loss-reduction plan.
2. OPEX efficiency indicators are unreliable, with values such as 195% (OPEX/kWh) and an implausible 681323215523% (OPEX/peak demand), indicating possible calculation or data quality errors.
3. Key inputs are missing (e.g. salary cost ratios), and the data compliance score is only 3 out of 6, raising concerns about the integrity of the COS model.

Third, tariff benchmarking fails the NERSA test, as the study itself indicates that tariffs are “not in an acceptable range.” Despite this, the municipality is proceeding with above-inflation increases.

Finally, the municipality is also building in profitability margins of 10% (surplus and returns), which further inflates tariffs despite evident inefficiencies and unreliable data.

I hereby state that the proposed increase is not cost-reflective in a fair or reasonable manner. The evidence suggests

• inefficiencies (especially losses) are being passed on to consumers.
• underlying cost increases do not justify the tariff increase.,
• the COS model contains data gaps and questionable outputs.
• tariffs already fall outside acceptable benchmark ranges.

Accordingly, the increase should not be approved in its current form. At minimum, the municipality must be required to

1. correct data inconsistencies and improve compliance.
2. provide a credible loss-reduction plan.
3. align tariff increases more closely with actual cost drivers (particularly Eskom increases).
4. reassess tariffs to ensure compliance with NERSA benchmarking guidelines.

Yours sincerely

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