PRESENTATION TITLE

Presented by:Name SurnameDirectorate

Date

BRIEFING THE PORTFOLIO COMMITTEE ON WATER AND SANITATION

ON BULK WATER TARIFFS INCREASES FOR THE FINANCIAL YEAR

2015/2016

Presented by:

Name Surname: Mr. Anil SinghDesignation: Deputy Director General: Regulation

Date: 25 February 2015

Index

• Purpose of the presentation• Background• Comments to WB tariff proposals• Causes of higher than CPIX

increases• Proposed tariff increases• Challenges noted during

analyses

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Purpose of the Presentation

• To brief the Portfolio Committee on the consolidated Water Board tariff proposals for the 2015/2016 bulk water tariff cycle process.

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BACKGROUNDLegislative Mandate:Water Services Act 108 0f 1997

•Section 28

Water Boards (WB) are bulk water providers to other water entities and are established by the Minister.

•Section 29

The primary activity of a Water Board is to provide water services to other Water Services Institutions within its area

Section 30

•A water board may perform an activity other than its primary activity, only if it is not likely to limit the water board’s capacity to perform its primary activity

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BACKGROUND (2)Local Government: Municipal Finance Management Act (MFMA)

Section 42 • The MFMA provides for any national or provincial organ of state which

supplies water, electricity or any other bulk resource to a municipality or municipal entity for the purpose of providing a municipal service to consult extensively and in a comprehensive manner on any proposed changes in the tariffs that may impact on the municipal services.

•WB has a duty to submit tariff proposals to amend bulk water tariff every year and to adhere to timelines in terms Circular 23 of MFMA and s42(5)

•Tabling of the amended pricing structure in parliament by the Executive Authority. S42(4)

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Comments to WB Tariff Proposals

• DWS granted SALGA extension until the 31st January 2015 to submit their comments.

• SALGA provided comments on the tariff proposal for 08 WB out of 09 WB (88 %).

• SALGA supported tariff proposal of 5 WB (55%)

• 2 WB (22%) tariff proposals were not supported by SALGA – due to lack of clarity and substantiated information.

• SALGA didn’t express opinion on the tariff proposal of 1 WB ( 11% ) – due to lack of clarity and substantiated information.

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Comments to WB Tariff Proposals...(2)

•Currently 09 WBs are serving 54 WSAs countrywide

• Water Services Authorities (WSAs) were consulted by their serving WBs.

•Out of 54 WSAs consulted only 07 WSAs (12.9%) provided written comments.

•6 WSAs didn’t support tariff increase proposal due to the following:

-Affordability

-Percentage increase higher than CPIX

•Only 1 WSA accepted tariff increase proposals.

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Causes of higher than CPIX increases

•CPIX was taken into account.

•Increase direct cost drivers.

-Raw water prices (13% - 18.8%)

-Energy costs (12.7% - 18.5%)

-Chemicals (6.50% - 10%)

-Maintenance cost (11%- 14%)

-Salaries (around 08%)

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PROPOSED TARIFFS INCREASES

WATER BOARD 2014/15 TARIFF 2015/16 TARIFF % TARIFF INCREASE

Amatola 7.25 7.84 8.08%

Bloem 4.85 6.00 15%

Bushbuckridge 4.69 4.96 5.7%

Lepelle Northen 5.24 5.80 8.50%

Magalies 4.31 5.49 10%

Mhlathuze 3.33 3.53 9.44%

Rand Water 5.96 6.82 14.5%

Overberg 5.50 6.51 15.19

Sedibeng 8.14 9.00 8%

Umgeni 5.02 5.32 8.2%9

Challenges noted during the analyses In accordance with S 42 (5) of MFMA, all WB’s proposals must be tabled on or before 15 March to take effect by 1 July of the same year. Timelines in terms of Circ ular 23 provides that WB should submit their proposals by the 25 of January of each year.

SALGA requested extension of time is submitting their comments, which was granted until end of January 2015, thus

- WB submitted their proposals without SALGA comments, which were received after 31st January 2015.

- Some tariffs proposals were submitted to DWS with insufficient documentation in terms

of :- 5 year projections; non-adherence to guidelines.

Raw water prices not yet approved.

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THANK YOU

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