Solar users in South Africa could pay Eskom R500 more per month

State-owned power utility Eskom wants to change the way South Africa pays for electricity, with potentially big consequences for homes and businesses with solar panels.

Eskom chief financial officer Calib Cassim recently told the Business Times that the utility is asking energy regulator Nersa to approve a new pricing structure.

Under Eskom’s proposal, there would be a higher fixed charge for connecting to the grid and a lower charge per kilowatt-hour (kWh) of electricity used.

This would mean higher bills for those who use very little electricity, such as homes with solar panels.

Cassim said that one of the major issues was that 70% of charges are linked to electricity consumption, while 30% of customer bills are for the fixed infrastructure.

Eskom believes this ratio should be reversed. It is working on a new tariff proposal and plans to submit it to Nersa by August 2024.

While Eskom has yet to release details about its proposal, its salient points have remained the same as a similar plan the utility submitted in 2022, which Nersa rejected.

Eskom argued that the current system is unfair because charges do not reflect the reality of the costs of various parts of the system.

With Eskom being separated into three divisions — generation, transmission, and distribution — it also said it’s important that each company be able to charge prices reflective of its costs.

It proposed substantial increases in the monthly fees for grid connections, along with significant decreases in the per-kWh price of electricity.

Based on an analysis from Eskom about how its proposal would impact prices, households using less than 600kWh would pay R466–R2,564 more per month under its proposed system.

For example, users of its Homepower 1 tariff would see their fixed charge increase from R218 to R938 per month.

Analysing various usage profiles, Eskom showed that such users would pay R720 more per month if they used 0kWh, R551 more for 400kWh, and R466 more for 600kWh.

The analysis showed that Eskom’s proposed overhaul of fixed and variable charges would only break even for those households using more than 1,000kWh per month.

Critics of Eskom’s plan pointed out that it would likely encourage rooftop solar users to become even more self-sufficient and sever their grid connections entirely.

While Eskom’s proposed changes in isolation would be extremely negative for solar power users, developments like feed-in tariffs could offset it.

Feed-in tariffs allow customers to sell their excess solar power back to Eskom or the municipality.

However, how this will be implemented will determine whether it will help offset Eskom’s proposed grid connection fee increases.

For example, some municipalities that already support feed-in do not pay cash for excess solar power but instead credit customers’ accounts.

If these credits only apply to electricity usage and not fixed costs, then feed-in tariffs will mean nothing to households with rooftop solar.

Eskom has also proposed scrapping its incline block tariff structure, which increases the price as customers use more electricity.

However, just like its proposed change to variable and fixed costs, this will only benefit heavy electricity users, such as large households and businesses.

Eskom analysis of its proposed Homepower changes (Click to enlarge)

As an alternative to Eskom’s proposal, Nersa previously tabled its Electricity Price Determination Methodology (EPDM).

Its EPDM focused on tariffs being determined by the costs associated with generating and supplying electricity to specific users.

Eskom has criticised this plan as impractical, saying it would be extremely difficult to match off-takers to specific power plants to charge them accordingly.

In addition, the EPDM also groups users into different profiles, including a profile for those who use a variable amount of electricity every month.

Eskom warned that this could result in solar power users being grouped into a variable-demand profile that will see them pay five to ten times more in energy charges.

However, while Nersa’s proposal might make Eskom power more expensive for rooftop solar users, it does not discourage them from keeping their grid connections for emergencies.