Eskom proposes further tariff restructuring to ensure ‘transparency and fairness’

Eskom is asking the National Energy Regulator of South Africa (Nersa) to allow for a widespread restructuring of electricity tariffs.

The national electricity provider appeared before the regulator on Friday to present its plan to streamline its billing structure.

In line with Eskom’s phased unbundling, the entity feels the tariff restructuring is a necessity.

97% of customers residential

Eskom says the plan is to have customers pay the same when consuming an average amount, and that the tariffs restructuring is based on the user-pay principle. 

Onicah Rantwane, Chief Advisor for Electricity Tariffs and Policy Development, outlined where Eskom generated the most of its revenue, as well as who consumed the most.

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Eskom currently serves roughly seven million customers, 97% of which are residential users.

However, the overwhelming majority of users contribute only 8.6% of the revenue generated annually.

By contrast, urban and rural tariffs for bulk and public lighting — municipalities — amounted to 0.2% of the customers, yet accounted for 44.4% of generated revenue.

Industrial and commercial customers in urban areas are the biggest private contributors, paying 38.1% of the total revenue, despite being just 0.5% of the customer base.

10 tariffs into three

Eskom currently has 10 municipal tariffs it divides among users, with the plan being to reduce that to three.

“Currently, we are sitting at a point where our tariffs do not reflect the actual cost structure of the services that are provided,” said Rantwane.

She added that Eskom last revised its tariff structure in 2012, resulting in a mismatch exacerbated by Eskom’s pending unbundling.

The unbundled tariffs will be calculated based on a time of use charge, a generation capacity charge and a legacy charge.

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The time of use charge will account for 82% of the overall charge, with the legacy charge and generation capacity charge accounting for 11% and 7%, respectively.

The generation capacity charge relates to the amount of kilowatts needing to be generated for users in an area and will vary based on location.

The legacy charge is a recovery and network fee that “ensures all electricity consumers contribute fairly”.

No more block tariffs

The three proposed tariff categories would be one large power user tariff that would incorporate five existing tariffs.

A separate tariff will exist for small power users that will incorporate the current business, home and land tariffs, while the pubic lighting category will remain the same.

Eskom is also proposing removing the block tariff structure that charges customers a separate rate based on a threshold of usage.

Customers who have disconnected from the Eskom grid or who no longer have an Eskom meter will not be required to make any payments to Eskom, as per the presentation.

Additionally, customers receiving the Homelight tariff will have their subsidies retained.

“Unbundling provides transparency and reflects a fair cost. According to our data, most of the municipalities are going to be benefiting,” concluded Rantwane.

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