1. Public Hearing on Municipal Tariff Guideline Increase for 2007/08 Financial Year

2. Public Hearing on Municipal Tariff Guideline Increase for 2007/08 Financial Year
Background
Process / Milestones
Guideline for 2007/08
Recommendations

3. Public Hearing on Municipal Tariff Guideline Increase for 2007/08 Financial Year
Background
NERSA issue an annual guideline to assist municipal budget process
2006/07 guideline – included indicative 2007/08 (5.4%)
Revised views on inflation and other costs
Based on Eskom tariffs (purchase cost), labour, maintenance, cost of capital, other operating costs

4. Public Hearing on Municipal Tariff Guideline Increase for 2007/08 Financial Year
Background (contd)
Revised inflation views (5.8% for 2007/08 and 6% for 2008/09)
Eskom retail tariff structural adjustments – will not have an effect in 2007/08 but in 2008/09
Revised guideline – 5.6% for 2007/08 and 6.1% for 2008/9

5. Public Hearing on Municipal Tariff Guideline Increase for 2007/08 Financial Year
Process / Milestones
Guideline for 2007/08 (5.6%) and indicative guideline for 2008/09 (6.1%) submitted to Pricing and Tariffs Subcommittee – 15 November 2006
Concerns / conditions raised and noted/addressed
Regulator approval – 30 November 2006
Guideline Letter to all Municipalities – 15 December 2006
Re-sent to all Municipalities mid January 2007

6. Process / Milestones (contd)
Public Hearing on Municipal Tariff Guideline Increase for 2007/08 Financial Year
Process / Milestones (contd)
NERSA guidelines on the process to consider municipal tariff applications … submitted to Pricing and Tariffs Subcommittee – 14 March 2007
Recommended process:
to hold public hearing to discuss municipal tariff guideline – for all municipal applications within guideline
To hold separate public hearing for municipalities applying for increase outside of guideline

7. 2007/2008
2008/2009
COST LINE ITEM
MUNIC % OF TOTAL COST
EXPECTED INCREASE %
WEIGHTED AVERAGE EXPECTED INCREASE
Purchases
67%
5.6%
3.7%
6.2%
4.2%
Salaries and Wages
11%
5.8%
0.5%
6.0%
0.6%
Maintenance/ Refurbishment/ Recapitalisation
5.0%
0.2%
0.3%
Capital charges in total 7%
0.4%
Other charges (including contribution to capital and funds, charges from and to other munic departments and general expenses).
10%
% increase without lag effect
6.1%

8. Public Hearing on Municipal Tariff Guideline Increase for 2007/08 Financial Year
Recommendations:
a guideline increase of 5.6% be approved for 2007/08 financial year.
An indicative guideline increase of 6.1% for 2008/09 be approved and communicated to municipalities.
Municipalities should be informed that of the approved revenue at least 5% must be used for normal maintenance
Should a municipality request additional funding for abnormal maintenance, the application should contain the following additional information:-
A detailed plan should be submitted to NERSA
Six monthly reports will then have to be submitted to NERSA on project progress in a ring-fenced format.
Where the funds are not utilised appropriately, these should be clawed-back in the next review period
Any increase above the guidelines should be appropriately motivated for and ring-fenced for consideration by the Regulator.

9. Thank you