Municipalities relying on an electricity tariff hike are likely to feel the crunch after Nersa ruled on a cap at 1.88% for the 2017/18 financial year, the Organisation Undoing Tax Abuse (OUTA).

OUTA welcomed the decision by the National Energy Regulator (Nersa) to cap municipal electricity tariff increases at 1.88%, down from an annual increase of 9%.

OUTA energy director Ted Blom said most municipalities were budgeting for increases well above inflation of 6% – with some larger entities posting budgets above 10%.

“Given the June 1 deadline for municipalities to publish new tariffs, we expect a massive rush of late applications for Nersa to condone increases above the 1.88% cap.

“South Africa has over 280 municipalities who were most likely relying on another big increase to subsidise other expenses and as such, the crunch is on the horizon," he said.

OUTA argues that the increases should be recalculated off a zero base, "as discrepancies between various municipality tariffs were not justified and increases should not be higher than that granted to Eskom."

OUTA said it was also concerned that 280 municipalities and thousands of corporate entities and citizens are directly affected by the retail tariff, "yet only five entities made representations on the municipal tariff hike notice to Nersa".

This, Blom said could be traced down to gross incompetence and lack of professional management at municipalities, the noise over downgrades and a feeling that government institutions have abandoned people’s needs and usurped their voice with state capture.

"OUTA is accordingly considering various actions to amend the manner in which notices are delivered and the period of such validity. In a constitutional democracy, not only must the voices of the people be heard, it must be seen to be heard," Blom said.