City Power discourages investment in energy efficiency and renewable energy

This blog is written by Eric Solot who holds a Master in Applied Engineering (Electrotechnology) from the University College in Ghent (Belgium). He is the founder and Managing Director of Alpha Power Solutions, which has been assisting businesses in Southern Africa since 2007 with their requirements in power factor correction, harmonic filtration and electrical power quality mitigation.  The customised solutions offered by Alpha Power Solutions have helped thousands of businesses to reduce their electricity costs and protecting their plants from destructive power quality events.

In their efforts to keep milking struggling businesses of their hard-earned revenue, City Power surreptitiously introduced several tariff changes in July 2020, which have a significant impact on the electricity cost incurred by businesses.

Rather than improving their internal efficiencies and revenue collection from defaulting customers, City Power has once again decided to take the easy route and charge their paying customers even more for the electricity they consume.

Instead of rooting out fraud and corruption, which is draining their coffers, City Power took the easy route like most parastatals, municipalities and state entities by increasing their revenue by charging more without improving the ever reducing service levels.

But in July this year, they went the extra mile by discouraging energy efficiency interventions and investments in renewable energy, by changing the way they charge for the Maximum Demand incurred by industrial and commercial businesses.

Up until 30 June 2020, maximum demand was one of the billing items of City Power which was based on the highest average energy usage of a business entity in a 30-minute window, during a particular billing period.

City Power sneakily changed the definition of maximum demand on 1 July 2020 to “the highest measured demand recorded over the preceding 12 months”.

This change has gone unnoticed by most businesses, as its impact cannot readily be understood by the uninitiated, which is the reason for this blog.

Over and above the usual annual tariff increases (8.1% for the 2020-2021 period, once again way above inflation), these changes have a very significant additional cost implication for all businesses.  Let me explain this with the following example:

Most businesses do not operate all their electrical equipment at the same time, all day, every day.  There are however times, where for a short duration, all or most of the electrical equipment installed on-site is in operation.  In the past, the high energy demand would only be billed for in the relevant billing month.  Since the tariff changes implemented on 1 July 2020, businesses are now being billed for the higher energy demand in a particular month, for the following 12 months!

Assume that a business was usually billed for an average monthly maximum demand of 500kVA (which last year would have cost the business R105,803.00 excl VAT, each month).  Now assume that this business had for whatever reason incurred a higher maximum demand of 700kVA during a particular month, then it would have been billed R148,162.00 excl VAT, or an additional R42,332.00 in demand charges.  When the business went back the following month to a demand of 500kVA, it would revert to the usual demand charge of R105,803.00

With the new tariff structure, the business is now penalised for the additional 200kVA for the following 12 months!  This translates in an additional electricity cost of R549,130.00 excl VAT, compared to R42,332.00 before the 1 July 2020!

But the implications of the tariff change do not stop there!  Contrary to what City Power management claims in the press, they do not want businesses to invest in energy efficiency and renewable energy interventions.  In their efforts to relentlessly increase revenue with these tariff changes, they have effectively increased the payback period of investments in electricity demand reduction interventions by an additional 12 months!

In this post-Covid economy, the ineptitude and greed of City Power are exacerbating the valiant efforts of private businesses to remain economically viable and threatening the employment of hundreds of thousands of people working in industrial and commercial establishments but also in the renewable and energy efficiency industry.

I always recommend new businesses to establish themselves in areas serviced directly by Eskom.  Their electricity tariffs are far cheaper than most of the municipalities who use their revenue from electricity sales to cross-subsidise their other services (sic) and feed the bottomless pit of fraud and corruption.

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