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Thursday, May 18, 2017

Tariff increases will kill incentives to save electricity and water

David Lipschitz Letter to the Cape Times published Mon 8 May 2017 in their Insight Section

THE City of Cape Town has published their draft tariffs for the 2017/18 financial year. Search for "draft electricity consumptive tariffs 2017/18" on the City's web site.

My calculations are based on people living in accommodation valued at more than R1 million. The poor still get their incentives and in fact the poor using more than 350 kWh per month will get up to 23.5% discount of their electricity usage.

And service fees for large users are increasing too, in one case by as much as 120%, so we can all look forward to higher inflation come July when this city, that works for us, makes it more difficult to work with us.

My calculations show that for someone using 600 kWh a month the price increase is 2.8% and someone using 1200 kWh a month the price increase is also 2.8%.

For 600 kWh it changes from R1125 domestic tariff excluding service fee, to R1156 home tariff including the fee, a 2.8% increase.

The 1200 kWh changes from R2493 domestic tariff excluding service fee to R2562 home tariff including the service fee, 2.8% increase.

But 300 kWh changes from R562 to R702, a 25% increase.

And 100 kWh changes from R187 to R400, a 214% increase.

For myself, a few years ago, we were changed from "Lifeline" to "Domestic" and from July this year we will be changed to "Home".

Being incentivised to use less has fallen by the wayside.

Note that the free water allowance is falling away! So if you are using 10 kL a month, and you were paying R66, you will now be paying R98, a 48% increase. Plus the free sewerage component is also falling away, increasing this increase even further.

It seems to me that the financial incentives to save electricity and water will cease on July 1, when these new measures come into play.

At some point, economics says that if you are prepared to pay the price, you can get what you need.

People might choose to buy more water and electricity instead of other luxuries.

And our water crisis will get much worse as people's financial psychological incentive to save is removed.

We might even end up with load shedding again, as people stop worrying about how much electricity they are using and just use as much as they want.

I tend to think that energy efficiency measures will simply go out of the window and people will use as much as they want.

This seems to be the case in my mind, where even though I am a very energy-conscious customer, I just don't see the point of saving electricity and water, when perhaps I can afford to pay the higher rates. There is just no incentive anymore for saving.

The city is putting up their prices. They are telling their customers "if you can afford it, we will supply you; and if you can't afford it, please move to another city".

The free water allowance is falling away, which means that the incentive to do all you can to use less than 6 kL of water a month, and boast about not pay anything, is meaningless.

Grid tie, without batteries, solar electric is already cheaper than City of Cape Town electricity. It could be up to half the price, depending on circumstances. And battery capability is increasing in leaps and bounds and prices are coming down, so we will soon be at grid parity with batteries. Grid parity is where one can make one's own electricity cheaper than one can buy it.

As I've been writing in this newspaper for years, it is time for residents to work together to produce their own electricity and water, at a much cheaper cost than our government can provide it, and in fact sell this cheap electricity and water to the city and to our residential neighbours.

Besides paying or moving, another opportunity is to move into "townships". This way I get a much cheaper house, with all the benefits that come with this, and I can afford to pay for security with the savings I get.

I think we will see enclaves of "rich people" living in the middle of townships, within the next few years. The "poor" won't want to move into "rich" areas, when they see the overtaxed rich, moving to them.

Lastly, existing homeowners who have paid for infrastructure numerous times are in effect subsidising new entrants into the market. New suburbs and new parts of suburbs and densification is happening all over the place. It seems to me that these people are being way undercharged for the services they need.

Lets suppose that a new power station is required for a new suburb.

Why should the entire population be forced to pay for it? And why do new suburbs need external power stations in any case?
  • Lipschitz is an energy analyst and owner of My Power Station.