1. Rand Water
TARIFF CONSULTATION
OCTOBER 2016

2. 2 PROCESS AND IMPORTANT TIMELINES
DWS / TCTA raw water pricing 30th September 2016
Customer consultation and information sharing
Consultation with National Treasury and DWS for input 10th October 2016
Consultation with SALGA 11th October 2016
Consultation with Water Services Forum 12th October 2016
Submission to DWS , Treasury and SALGA for input 13th October 2016
Customer notification 8th December 2016
Submission to DWS for Parliamentary approval 25th January 2017
Parliamentary approval 15th March 2017
Implementation 1st July 2017
DRIVERS
Municipal Finance Management Act: 6 months advance notice
National Treasury & SALGA: 40 days for consideration
Bulk Water Supply Contract: prior consultation and information sharing 2

3. OVERALL INTERNAL INFLATION
Rand Water’s tariff is determined by the cost of doing business in the year that the tariff will be applicable, that is
The concern with the overall inflation is that it continues to remain very close to the upper limit of the 3% - 6% range.
Over the past four years, CPI has continued to remain very close to the upper limit.
It therefore becomes difficult to expect the bulk potable water tariff to be within this range. 3

4. CHEMICAL COSTS
Turbidity
The erratic rainfall pattern has proved to be a challenge in terms of planning.
Heavy downpours over long periods of drought increases the turbidity of the raw water, thus increasing required chemicals. This has been witnessed in the past and is expected to continue into the future, in particular during this drought period.
2016
2017
2018
2019
2020
2021
2022
Exchange Rate (R/US$)
15.90
16.01
15.27
15.35
15.45
15.94
15.51
2. Exchange Rate
An important component of chemical costs is that some of the chemicals are imported. Therefore, the strength of the Rand with regards to chemical cost projections is important.
3. Poor Monitoring of Effluent Discharge
Rand Water has, over the years, expressed its concern with regards to the poor monitoring of effluent discharge in the Vaal River system.
This has a direct impact on the cost of purifying the water.
At the same time, the raw water that Rand Water purchases from DWS has a Catchment Management Charge. 4

5. ALTERNATIVE 2 : APPLYING THE LOWER ENERGY INCREMENT
LABOUR COSTS
ALTERNATIVE 2 : APPLYING THE LOWER ENERGY INCREMENT
In an environment where CPI is expected to remain above the 3% - 6% range, labour costs are also expected to be significantly up.
Economic projections show that very difficult salary and wage negotiations will not abate.
The water sector including local councils and Rand Water are anticipated to face the same challenge.
2016
2017
2018
2019
2020
2021
2022
Labour
8.75%
8.25%
8.10%
8.35%
8.55%

6. ALTERNATIVE 2 : APPLYING THE LOWER ENERGY INCREMENT
OTHER EXPENSES
ALTERNATIVE 2 : APPLYING THE LOWER ENERGY INCREMENT
Over the years other expenses have always increased by CPI. This trend is expected to continue. The major cost items are as follows:
Other Expenses
R m %
Maintenance, R & R and general repairs
177.2
Ministerial Directives/Rural development
75.3
Corporate Social Responsibility projects
47.0
Insurance
30.1
Transport costs
41.6
Rehabilitation and sludge removal
21.3
Security services
33.7
Laboratory testing equipment
13.3
Cleaning contract
16.8
Skills development levy
10.6
Municipal services
11.5
Marketing & stakeholder relations
8.0
IT services - software maintenance & licenses
Staff recruitment
4.4
Reports and surveys
3.5
Sub-total
515.6
95%
Other
29.2 5%
544.8
100%

7. 7 PROPOSED TARIFF Rand Water is currently charging 756 cent per kl.
Rand Water is also rebating to customers cents per kl arising from the AMD charge, effectively 736 cent per kl.
The proposed new price is 833 cents per kl.
Therefore, from gazette price to proposed gazetted price, Rand Water is proposing a 10.2% tariff increment.
Municipalities
Current Tariff
(1 July 2016 – 30 June 2017)
Rebate
(1 July 2017 – 30 June 2018)
New Tariff
Tariff Increment
≈2.9%
10.2%
C/kl
Tariff
Excluding VAT at 14 per cent
19.75 cents ≈ 7

8. DEMAND-SIDE MANAGEMENT TO ACHIEVE A 15% CURTAILMENT ON URBAN USERS IN RAND WATER’S AREA OF SUPPLY8

9. JOHANNESBURG WATER (SOC) LTD
EKURHULENI
05 Sept KL/day
26 Sept KL/day
KL/day reduced KL
% reduced 19 Sept %
% reduced 26 Sept %
15% reduced KL/day
05 Sept KL/day
26 Sept KL/day
KL/day reduced KL
% reduced 19 Sept %
% reduced 26 Sept %
15% reduced KL/day 9

10. 10 EMFULENI TSHWANE 05 Sept 2016 269 758 KL/day
KL/day reduced KL
% reduced 19 Sept %
% reduced 26 Sept %
15% reduced KL/day
05 Sept KL/day
26 Sept KL/day
KL/day reduced KL
% reduced 19 Sept %
% reduced 26 Sept %
15% reduced KL/day 10

11. 11 MOGALE No. Municipality 15% reduced KL/day 1. Johannesburg Water
No.
Municipality
15% reduced KL/day 1.
Johannesburg Water 2.
Ekurhuleni Local Municipality 3.
Tshwane Local Municipality 4.
Emfuleni Local Municipality 5.
Mogale City
78 363 6.
Govan Mbeki Local Municipality
77 463 7.
Rand West City
60 202 8.
Metsimaholo Local Municipality
40 484 9.
Rustenburg Local Municipality
38 127
10.
Merafong Local Municipality
35 654
11.
Thembisile Local Municipality
28 026
12.
Midvaal Local Municipality
25 764
13.
Royal Bafokeng Nation
16 905
14.
Victor Khanye Local Municipality
16 172
15.
Lesedi Local Municipality
14 887
16.
Ngwathe Local Municipality
7 347
17.
Madibeng Local Municipality
4 335
05 Sept KL/day
26 Sept KL/day
KL/day reduced KL
% reduced 19 Sept %
% reduced 26 Sept %
15% reduced KL/day 11

12. EXAMPLE : JOHANNESBURG WATER (SOC) LTD
Stepped Tariff
The split of allocation between customers is based on the data as presented by COO.
In the event that physical water restrictions fail to yield results, Rand Water wants to have an opportunity to impose a stepped tariff
The model for the stepped tariff (using collective AADD, but applied to each customer’s relative allocation) is:
First step at AADD = 3683 Ml/d,
from 3683 Ml/d to 3783 Ml/d.= Normal tariff + 20%
Second step at AADD = 3783 Ml/d,
from 3783 Ml/d to 3873 Ml/d = Normal tariff + 40%
Third step at AADD = 3873 Ml/d,
from 3873 Ml/d to 3973 Ml/d = Normal tariff + 60%.
Final step at AADD = 4073 Ml/d,
from 4073 Ml/d = Normal tariff + 100%
EXAMPLE : JOHANNESBURG WATER (SOC) LTD
05 Sept KL/day
26 Sept KL/day
KL/day reduced KL
% reduced 19 Sept %
% reduced 26 Sept %
15% reduced KL/day
Pros: It sends a message that normally works
Cons: It implies that there is additional water, as long as it can be paid for, is available when there is none. 12

13. 13 Amounts to be paid back to municipalities
These are the amounts that Rand Water has accumulated and must be paid back to customers
Total 2014 – When the Eskom tariff was revised, the tariff was revised downwards.
Total 2015 – Municipalities agreed to a Water Demand Management Fund
Total AMD – This arose when the AMD charge was not included in the raw water charge by DWS
Each municipality is due this amount
Therefore, an opportunity exists for each municipality to utilise these funds for the water restriction effort.
The concern is that this may not happen 13

14. THANK YOU 14

15. PROCESS AND IMPORTANT TIMELINES15