Electricity Press Release

The ability to meet all monthly cash commitments was the main consideration in Overstrand Municipality’s unanimous Council resolution today (28 June 2011) to adjust the electricity deposits of existing Overstrand clients from September onwards to bring them in line with those payable by new applicants, be they individuals or businesses.

In future, this adjustment will be affected on an annual basis to ensure that deposits are equivalent to the client’s two highest months of consumption or to a minimum amount, which is R3,300.00 for the new financial year. To accommodate consumers this increase will be paid off over a period of ten months or they can change over to pre-paid electricity meters.

This move was unavoidable if the municipality wants to deal responsibly with its financial affairs, Municipal Manager Mr Werner Zybrands said in response to questions during the debate on the issue.

With the drastic hike in electricity rates, to the tune of 107 percent over the past three years, the municipality now finds itself in a position where the deposits at its disposal are simply not enough to guarantee its financial viability. In the current year, the ratio between cash on hand and fixed monthly obligations can drop to around 0,66:1, where the legal requisite is fixed at around 1,2:1.

During the budget process the municipality’s financial affairs was thoroughly considered and it was realised that its financial sustainability will be seriously affected if consumer’s electricity deposits are not adjusted every year.

Consumers should keep in mind that a deposit not only serves as a safeguard against defaulters. It also provides the municipality with the required capital to purchase the service which, in the case of electricity, ESKOM demands should be settled within 10 days from month-end.

This situation explains why deposits should be equivalent to two months’ consumption. In general, meters are read during the first week of the month, consumption is levied against a consumer’s account at the end of the same month and the final settlement date is the 20th of the next month. Consequently, by the time the municipality receives its first instalment, it has already delivered two months’ service and settled the account in full with ESKOM.

Up till now consumers electricity deposits were only adjusted when they defaulted on payment. The deposits of those who paid their accounts as required were never adjusted and some of the accounts date from an era when deposits were not required.

To soften the blow for these consumers, the increased amount will be payable over a period of 10 months, commencing September 2011. Alternatively, residential consumers could switch to pre-paid metres.

In the new financial year, the costs associated with such a move will amount to R975 for installation and R346 in the form of a deposit. The latter will be deducted from the client’s existing deposit. The excess or deficit will be debited or credited to the client’s municipal account. Based on experience, consumers with pre-paid metres have a tendency to monitor and manage their daily consumption of electricity far more effectively.

It is anticipated that clients would switch to prepaid metres en masse; for this reason we have stocked up on 3500 metres. Should clients apply for a conversion before August, they will not be required to pay the increased deposit, even in cases where the prepaid metres cannot be installed immediately.