Eskom is proposing new power tariffs that could mean households with lower than the average electricity consumption in South Africa and many on-grid solar users will pay hundreds of rands more every month.
As it stands, much of the variable and fixed costs accumulated in producing electricity in South Africa are paid for through a single electricity tariff — calculated per kWh of consumption.
Eskom maintains that tariffs need to be modernised to reflect the changing electricity environment and ensure fair recovery by all of the services to be provided by all grid users and the system.
“The aim is not to get additional revenue but to rebalance tariffs in such a way that fixed costs are recovered to a greater extent by fixed charges,” Eskom said.
Eskom wants the tariff to be broken up into two charges that account for the costs separately.
Customers would pay a new and increased fixed capacity fee, independent of usage, and a reduced variable charge based on their consumption.
In short, Eskom said the new tariff would achieve the following:
Avoid unjustified over/under-recovery of costs from customers that create unintended subsidies.
Ensure fairness, equity, and transparency of subsidies existing in the system.
Include use of systems costs for generators.
Prepare for Eskom unbundling by ensuring divisional costs are accurately reflected to avoid large tariff impacts after legal separation.
Provide the correct pricing signals for capacity and usage.
Mitigate volume and revenue risk, and avoid price increase impact on all customers (reduced volume = higher price increases)
According to Eskom, the current tariff structure subsides those households with lower usage through the fees charged to those with higher consumption.
Eskom said its new tariffs would be designed so that, as far as possible, the average customer should pay no more or less than their current tariff structure.
The utility previously said that the average household in South Africa used 900kWh of electricity per month.
It provided MyBroadband with calculations from its previous proposal to the National Energy Regulator of South Africa (Nersa) that showed how much the new tariff would cost for different consumers compared to the current prices.
Although this was based on the proposal for the previous financial year — 2020/2021 — the overall approach remains the same for the new tariff proposal that Eskom plans to submit to Nersa in August 2022.
According to this data, Eskom customers with usage below 900kWh will pay substantially more than before.
A user that previously used 400kWh on Homepower 1 would be paying R593 per month more on the proposed new Homepower 1 tariff.
Households with 800kWh monthly usage would pay R271 more. The higher the monthly consumption, the lower the increase.
Customers who use 1,000kWh or more would pay less.
The chart below illustrates how an electricity bill for various usage levels would compare if Eskom implements the proposed changes to its Homepower 1 tariff.
It also shows how these charges compare with a cost-reflective tariff.
As illustrated above, the new structure would also be detrimental to solar power users who only occasionally use grid power.
They previously only paid R218 for their grid connection if they used none of Eskom’s electricity.
With the proposed additional fixed capacity charge, it would be R720 more expensive per month, for a total of R938.
The actual increase gets lower as households consume more of Eskom’s electricity, making it seem like the utility is disincentivizing using self-generation with the grid as backup.
The upside is that Eskom is also proposing a net-billing rate for those capable of producing excess electricity.
That rate would be the same as a new time-of-use energy charge for the proposed Homeflex 1 tariff.
With this mechanism, Eskom would effectively give electricity back to the customer at the end of the month, resulting in a discount on their bill.
But Eskom said it would propose the structural changes to more cost-reflective capacity-based charges irrespective of net-billing being in place.
The chart below shows how much more Eskom customers will pay on the proposed Homeflex 1 time-of-use tariff compared to the current Homepower 1 tariff.