Eskom seeks tariff overhaul

Eskom in its proposal for a tariff increase next year has factored in the change of behaviour of its consumers, including more affluent households installing solar panels, time-of-use tariffs with a plan to charge more for electricity during peak periods and to adjust winter tariffs to be higher than those applicable in summer.

The power utility proposal submitted to National Energy Regulator of South Africa (Nersa) in September, says Eskom wants to scrap the current pricing model, which is an inclining block tariff and for it to be replaced by a time of use structure which is similar to the pricing strategy used for industry and larger municipalities.

It also wants more affluent households, who have installed solar panels and are consuming less electricity from Eskom, not to benefit from lower charges for the first 600kWh of electricity which was designed to ensure indigent households could afford their basic electricity needs.

Nersa plans to publish a consultation paper on the application in November and consult stakeholders on the proposals, which include a request from Eskom for a 36.1% tariff increase for direct customers in the first year in 2026, followed by a 12% rise in 2027, and another 9% in 2028.

The energy regulator plans to make a final decision in January, which may be in time for the tariff increase that will apply to Eskom’s direct customers from April 1.

Eskom Chief Financial Officer Calib Cassim at a media briefing on Monday acknowledged that the proposed 36% increase may seem exorbitant, particularly in a challenging economic climate.

The power utility said its financial future is marred by uncertainties, increasing debts and new regulatory challenges while it faced the imperative to ensure a stable and sustainable energy supply for the country’s economy.

He said part of their financial recovery plan aimed to reduce Eskom’s debt from R480 billion to an estimated R250bn by the end of the determination period.

Eskom said there is a R40bn discrepancy in Nersa’s determinations for the 2024 application, which indicated an about 10% shortfall in revenue that the power utility wanted addressed before moving forward with the new application.

Melanie Veness, chairperson of the Association of South African Chambers, said they would oppose Eskom’s tariff increase application.

“Whatever increase is granted by Nersa then gets transferred to the municipalities, and I see an even higher increase that municipalities will pass onto their customers.

“Eskom is in this situation largely as a result of non-payment from municipalities but business and consumers get punished no matter what we do, we get punished when they don't maintain the infrastructure and they have to load shed and we get punished when they don't collect their revenue.”

Veness added that clarity was needed on how the utility was justifying such exorbitant hikes.

“The electricity regulations are very clear on what they can and cannot claim.”

Energy expert Professor Wikus van Niekerk from Stellenbosch University said the situation with Eskom had played out all over the world, where vertically integrated monopolies like Eskom were faced with the change of behaviour from their consumers.

“Eskom’s consumers are reverting to other ways of getting their energy and it is to protect its revenue.”

Van Niekerk said it was not uncommon for an energy supplier to increase costs during peak periods.

“Utilities use higher cost of electricity during peak times as a driver to push down demand during these peak hours and they may change the behaviour of consumers.”

He said previously, consumers were charged only for the kilowatt hours that had been used but this had changed.

“Eskom found that people are using less, especially the more wealthy people because of solar etc and Eskom is moving towards a structure where the service fee, the fixed cost component, is becoming increasingly the variable component,” Van Niekerk said.

Ish Prahladh, president of the eThekwini Ratepayers and Residents Association (ERRA), said municipalities were struggling to maintain their infrastructure and to strike a balance between providing free electricity to communities that needed it while looking to their existing rates base for revenue.

“We are not going to agree to the demands of an increase and will appeal against the way that they are looking at pricing.

“They need to cut down their own costs in their own departments instead of passing on these high costs to consumers,” Prahladh said.

The Mercury