Cape Town Defies Grid Crisis: Curbs Price Hike, Invests in Sustainable Energy

The National Energy Regulator of South Africa (Nersa) recently approved an 18.49% tariff increase for municipalities across the country. However, the City of Cape Town has announced that it will limit the price hike for its residents to 17.6%. Mayor Geordin Hill-Lewis shared the news while presenting the city’s budget for the 2023/24 fiscal year.

1. Cape Town will limit the electricity price hike for its residents to 17.6% instead of the nationally approved 18.49%, aiming to protect lower-income customers under the “Lifeline” tariff.
2. The city plans to invest R2.3 billion in various energy mitigation efforts to reduce load shedding and transition towards more sustainable energy sources.
3. Despite the city’s efforts, electricity prices in South Africa continue to rise, with affluent households increasingly seeking off-grid alternatives, potentially leaving poorer households to bear the burden of higher electricity costs.

In an effort to shield residents from the full impact of the Eskom-driven price hikes, the city plans to offer increased protection to lower-income customers under the subsidized “Lifeline” tariff. This move aligns with the city’s broader strategy to decrease its reliance on Eskom and minimize load shedding in the municipality.

Mayor Hill-Lewis emphasized the city’s commitment to supporting residents during these challenging times, stating, “I know how much people are struggling to make ends meet right now, and that Eskom’s spiraling electricity prices wreak havoc on household budgets.” As part of the Lifeline electricity tariff adjustments, customers who consume more than 350 units will see their rate decrease from R3.71 to R1.84. Additionally, the property value criteria for Lifeline customers will be raised from R400,000 to R500,000 to account for increased property values.

To combat load shedding, the City of Cape Town plans to invest R2.3 billion in various mitigation efforts. These initiatives include:

• R220 million to purchase power on the open market;
• R288 million for the Power Heroes voluntary energy savings incentive scheme;
• R1 billion to operate the Steenbras hydro-electric plant;
• R53 million in ‘cash for power’ payments for solar power from residents and businesses;
• R640 million on city-owned solar plants; and
• R50 million in battery storage technology.

Hill-Lewis expressed confidence that within three years, Cape Town will be able to protect its residents from the first four stages of Eskom’s load shedding. He added, “We are confident that Cape Town will be the first metro to break free from the suffocating hold that Eskom has placed on our country, and in doing so we will show that there is a bright electric light at the end of this Eskom tunnel.”

Despite the city’s efforts, electricity prices in South Africa continue to rise. In January 2023, Nersa approved an 18.65% increase in electricity prices for 2023 and a 12.74% hike for the following year. These increases will apply to Eskom direct customers, including municipalities, and will take effect from 1 April 2023. Additionally, Nersa approved an 18.49% hike for customers of municipal electricity services, set to begin on 1 July 2023.

These price hikes are placing significant pressure on household budgets, which are already strained due to high inflation and rising interest rates. At the same time, electricity availability in the country is at an all-time low. The combination of continuous load shedding and escalating prices has led many middle-class and affluent households to seek off-grid alternatives, such as solar power and other energy mitigation measures.

The South African government has encouraged this shift away from Eskom by offering a rooftop solar tax incentive. However, local governments and municipalities have expressed concerns. The South African Local Government Association (Salga) has warned that municipalities rely heavily on revenue from electricity sales, which could be jeopardized by the widespread adoption of alternative power sources.

This trend could potentially create a situation where more affluent households are able to leave the grid, leaving poorer and more vulnerable households to bear the burden of higher electricity costs to make up for the lost revenue.

Eskom has long advocated for increased electricity tariffs, arguing that current fees do not accurately represent the cost of producing electricity. The struggling power utility had initially requested a fee hike of over 32%.

The City of Cape Town’s decision to limit the electricity price hike for residents and invest in alternative energy initiatives represents a proactive approach to addressing the country’s energy crisis. By taking these steps, Cape Town aims to protect its citizens from the adverse effects of load shedding and high electricity prices, while also paving the way for a more sustainable energy future.

Cape Town’s investment in energy mitigation efforts

These investments aim to address load shedding issues and promote sustainable energy solutions within the city.