Advice and Opinion

Municipal property values could see electricity price hikes for some Cape Town home owners

Some prepaid electricity customers in Cape Town may be in for nasty surprise come October 2016, as the city adjusts their qualifying criteria for their subsidized Lifeline Tariffs. The new, more stringent rules add a maximum municipal property value to the mix that will see many households currently on Lifeline rates migrated to the more expensive Domestic Tariff.

“Basing electricity tariffs on property value isn’t a new thing,” says Bill Rawson, Chairman of the Rawson Property Group. “In fact, the City of Cape Town has been implementing tariff restrictions based on property values for a while – it’s a simple way to ensure subsidised rates are only available to those who are legitimately poor.”

Currently, those with credit meters billed on a monthly basis don’t have the option of applying for Lifeline rates at all, but new and prospective prepaid customers whose municipal property values don’t exceed R300 000 and who use 450 kWh or less each month (based on a twelve-month average) can qualify for significant savings on their electricity costs.

The rules for existing prepaid electricity customers, however, are a little different depending on when they had their meter installed, and this is where October’s policy changes come into play.

“In the past, all you needed to qualify for subsidised electricity rates was a prepaid meter and an average power usage of under 450 kWh per month. What that meant was that even very wealthy people living in beautiful and expensive homes could take advantage of the subsidies by simply using minimal amounts of electricity,” explains Rawson. “To prevent this, the maximum municipal property value of R300 000 was added to the qualification criteria for the Lifeline tariff, but it wasn’t retroactively applied to existing prepaid customers.”

Because of this, many customers who have been on Lifeline Tariffs for several years would not be eligible for those subsidies if they reapplied today due to the value of their properties. The City of Cape Town’s tariff migrations scheduled for October 2016 will begin to move these customers on to the Domestic Rate. This will allow the City, according to their media release on 15 April 2016, to reduce the average tariff increase in 2016/17 for all Cape Town’s electricity consumers to 6.62% as opposed to 8.26%.

To ease customers into the tariff migration process, only those with properties valued at more than R1 million will be migrated from their current Lifeline Tariff to the ordinary domestic rate, however. Exemptions will also be made for those who qualify for pensioner or disabled rebates, and registered indigents as per the Credit Control and Debt Collection Policy.

“For most homeowners who can afford to pay the rates and taxes on a home valued at over R1 million, the additional cost of the ordinary Domestic Tariff should hopefully be negligible in the grand scheme of things,” says Rawson. “It’s definitely preferable to a more dramatic overall electricity price increase, which raises the cost of living across the board thanks to the effect it has on general inflation and the local economy.”