South African households that use both their own solar power and Eskom’s grid could soon be paying up to 10 times — or 1,000% — more for electricity than the country’s biggest power users.
Sunday newspaper Rapport reports this is one of the implications of a new electricity pricing methodology planned by the National Energy Regulator of South Africa (Nersa).
The regulator recently accepted a set of principles that will guide the revised methodology, including that consumers must be grouped according to their usage habits.
According to this principle, consumers must be categorised into three main groups:
- Big power users like mines and production facilities with consistent day and night usage.
- Normal power users like households with peak usage in the morning and evenings and lower usage during the middle of the day.
- On-grid solar and self-generating power users that have fluctuating demand based on sunlight availability.
Nersa has also accepted a principle that each user category must pay tariffs based on the actual cost of supplying electricity to them.
The impact will be that the biggest power users will pay substantially less than their existing rate.
Currently, they subsidise around 14% of the costs of generating electricity for regular users.
In contrast, users with solar panels with fluctuating Eskom electricity demand will have their tariffs linked to the cost of running Eskom’s expensive diesel-powered open-cycle gas turbines (OCGTs).
Eskom currently relies on OCGTs to supplement its generation during peak hours.
Because they use diesel instead of coal, they are substantially more expensive to operate.
Energy expert Chris Yelland previously estimated it cost Eskom around R4 to generate a kWh of electricity using the OCGTs.
At that time, it was around ten times more than buying renewable electricity per kWh.
During the same year, generating electricity with coal at the expensive Medupi power plant cost an average of R1.49 per kWh.
According to Rapport, solar users still connected to Eskom’s grid could end up paying between 5 and 10 times more for electricity than the large power users.
Rapport said that Eskom was sceptical that Nersa’s approach would be practically feasible.
The utility previously proposed that energy tariffs be split into fixed and variable costs to address its loss in revenue from customers using partial self-generation.
Under the current pricing regime, Eskom includes both usage and network costs in the variable (c/kWh) and fixed (R/kVA and R/customer) charges.
But Eskom claims that users with solar power systems force the utility to ramp up generation at a faster rate in preparation for peak demand in the evening because they could not rely on sunlight for their full energy needs during that time.
That meant the cost of providing them with power was inconsistent with the actual tariff they paid, which is typically the same as regular users.
Eskom wants all consumers to be charged a volumetric energy tariff and a daily network fee, independent of usage.
In effect, it could mean solar panel users would pay more than before as they would have to pay a daily charge even if they could meet their total electricity demand using their own generation.
Eskom also wants incline block tariffs to be scrapped, which could see heavier power users pay less for electricity, while lower power users will pay more.
Experts have warned that punishing solar power users would drive away more paying Eskom customers by encouraging them to go entirely off-grid. That could deliver another big knock to Eskom’s revenue.
Nersa aims to finalise a discussion document on the new methodology in February.
It will then hold public hearings on the methodology in May to have it ready by August, in time for Eskom to have its next electricity tariff application based on the new guidelines.