National Assembly - ‘PUC expects to collect extra R24 million annually with increase in utilities tariffs’


12-September-2018

Among the National Assembly’s first order of business after resuming a new trimester yesterday was to question the Public Utilities Corporation (PUC) on the recent tariff increase, which took effect September 1.

While the increase will affect domestic users’ upcoming electricity, sewerage and water bills, for those in the commercial sector the increase is only for water and sewerage.

Minister for Environment, Energy and Climate Change Wallace Cosgrow along with PUC’s chief executive Philip Morin and deputy chief executive Joel Valmont were in attendance at yesterday’s sitting to answer the private notice question.

Due to the fact that the leader of government business Charles Decomarmond had tabled the PUC tariff questions on August 20 while the revised order paper had opted for a similar private notice question from leader of the opposition, Speaker Nicholas Prea allowed both leaders to address their questions.

Mr Decomarmond requested that Minister Cosgrow explain the reasoning behind the tariff increase and if the corporation had assessed the impact of such on consumers.

He was additionally interested to know when PUC is expected to revise and increase its utilities tariffs yet again.

Minister Cosgrow explained that the tariffs for PUC’s three services (electricity, water, sewerage) have increased as per its tariff rebalancing programme to guarantee sustainability of these services for years to come and for long-term financial investments.

“The current tariff structure has elements called cross-subsidisation. In simple terms, this means that one sector is subsidising another sector and principally it is the business sector that is paying more in terms of electricity to sustain the much lower tariffs in the domestic’s,” Mr Cosgrow pointed out.

According to PUC, the utilities tariffs for homes are currently not reflecting the real cost of production. Through the rebalancing programme tariffs increases will be scheduled very year to gradually even out this disparity.

This rebalancing programme is in addition to PUC’s parallel rebalancing structure which is determined by the price of fuel and is revised every three months – the upcoming revision is scheduled for next month.

“PUC has acknowledged the impact the increases will have on its customers and that is why the rebalancing programmme is a long-term one; so that the impact is minimal,” Minister Cosgrow stated.

He also added that the implementation of the Progressive Income Tax also lessened the impact of the increase.

For customers who are struggling to pay their bills, PUC are gearing up to start a democratisation of photovoltaic systems that will help these vulnerable homes.

Meanwhile, Mr Ramkalawan inquired on which legal basis or regulation the PUC used to implement the increase in tariffs.

Minister Cosgrow affirmed that section 17 (2) of the PUC Act of 1996 allows the corporation to undertake revision of tariffs and other charges in relation to its services.

The same law provides the minister responsible for PUC with the power to set up regulations to ensure that these changes become legal.

“The recent tariff increase became effective through the Statutory Instrument (S.I) 55 of 2018 which was officially gazetted on August 30, 2018,” Minister Cosgrow stated.

However, the gazette had yet to be brought to the attention of the National Assembly.

Moneywise, Minister Cosgrow revealed that PUC estimates that it will accumulate R24 million each year from the rebalancing programme.

The company’s profits for 2016 were R311 million, in 2017 it was R227 million and the predicted profit for 2018 expects to add up to R240 million.

He further detailed the various initiatives PUC and the government are planning to undertake in order to lower the cost of utilities, chief among those is the generation of electrical power through LNG (Liquefied Natural Gas).

 

 

 

 

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