Mandela Bay’s Revenue from Electricity to be R3.7 Billion by 2016/17

DECEMBER 10, 2014

Nelson Mandela Bay’s budgeted operating revenue from the sale of electricity will reach just less than R3.7 billion by the 2016/17 financial year from R3.2 billion in the current financial year, according to figures released by National Treasury.

Over the same period the metro’s bulk purchases will rise from R2.3 billion to R2.7 billion.

National Treasury notes that when comparing the revenue generated from the sale of electricity to the expenditure incurred on bulk electricity purchases “it would appear as if metros generate a substantial profit from the sale of electricity.

“However, bulk purchases only constitute an average of 67% of the cost of managing and rendering the electricity function. Other operational costs include expenditure of personnel, materials, refurbishment, repairs and maintenance, distribution losses and overhead costs.”

National Treasury says that to illustrate this “the increases associated with the sale of electricity in the two outer years of the current three-year Medium Term Revenue and Expenditure Framework period are similar to the budgeted increases associated with bulk purchases”.

It says the net profit on the sale of electricity “is an important revenue source for metros. This profit margin has been under pressure due to the rapid increase in the bulk price of electricity resulting in affordability challenges.

“Municipalities are experiencing a two-fold impact of the high bulk electricity increases: lower sales levels due to changes in consumption patterns and increased bad debt as a result of affordability pressures.”

The National Treasury figures also show that the metro’s budgeted operating revenue from the sale of water will reach R687.8 million by the 2016/17 financial year from R558.2 million in 2014/15. Bulk water purchases by the metro over the same period will increase from R92.9 million to R116.9 million. - MetroMinutes.