Energy21.11.2024

Bad news for people spending less than R2,793 on electricity in a month

Eskom’s proposed retail tariff plan (RTP) amendments, which aim to significantly change how electricity tariffs are calculated, will hit small and medium-sized households with low to moderate electricity consumption the hardest.

Conversely, large households consuming copious amounts of electricity will pay substantially less if the amendments are approved.

The power utility has received criticism for its multi-year price determination (MYPD) application to the National Energy Regulator of South Africa (Nersa), which requested an increase in electricity tariffs by a combined 66% over the next three years.

Eskom has argued that this is necessary for its tariffs to be cost-reflective.

However, it neglects to mention that the major elements driving up its costs include high debt servicing fees related to years of corruption and mismanagement.

Another cost driver is its large wage bill on a bloated workforce that the World Bank had warned years ago was well over double the size needed to serve Eskom’s operations.

In addition to significantly higher tariffs as part of its regular annual adjustments, Eskom wants to restructure the relationship between fixed and variable charges so that the former contributes a bigger part of its revenues.

The new RTP methodology will result in substantially higher fixed electricity charges, regardless of usage.

Justifying the proposal, the utility said grid-tied solar power users who only occasionally consumed Eskom electricity were being subsidised by those customers without.

In an interview with Newzroom Afrika, Eskom CFO Calib Cassim said these users had to pay for the “insurance” of having Eskom as an additional “battery”.

“The consumers that are on the grid 24/7 are going to pay for the entire infrastructure, and these other customers are going partially off, they are going to come in and get a free benefit,” Cassim said.

Cassim also pointed out that grid-tied solar users can feed electricity back into the grid to reduce their bills.

However, most municipalities do not yet support feed-in schemes. Those that do require that customers first buy expensive feed-in meters, which could often take years to pay off through electricity credits.

Eskom comes across as particularly harsh, considering its inability to provide reliable power was the reason most people invested in solar in the first place.

In addition, Eskom has directly acknowledged the role that solar power users played in reducing demand, which allowed it to keep load-shedding suspended since March 2024.

However, the impact to solar users overshadows an even larger concern with Eskom’s RTP proposal.

Its higher fixed tariffs will also punish small and medium-sized households in the lower and middle-income classes that don’t have solar but still consume much less than the 900kWh Eskom claims is the monthly average usage for households.

Eskom’s average consumption figure distorting the reality

Eskom has stressed that the RTP changes will result in the “average” customer paying less for electricity than on their current bills.

This is because the plan will see the Incline Block Tariff scrapped, meaning higher blocks of usage will no longer be punished with significantly increased tariffs.

MyBroadband asked Eskom about the basis for its claim of an average of 900kWh usage in South Africa several week ago, but the utility never responded to our questions.

That came after we calculated the average household consumption in South Africa using data from reputable sources and found it was around 185kWh to 214kWh per month, significantly less than Eskom stated.

This was based on Eskom’s own annual electricity demand figures, Stats SA’s General Household Survey, and the proportion of electricity consumed by Eskom’s residential customers.

Solar component supplier PowerNSyn has estimated the average figure to be 15kWh per day, working out 450kWh per month, while Ecoflow has estimated it is about 9kWh per day or 270kWh per month.

A Reddit thread of South African users sharing their average electricity consumption also revealed that the vast majority of one- and two-person households and even some four-person households reported consumption well under 900kWh per month.

When running these lower consumption figures through Eskom’s retail tariff plan, the negative impact on smaller households is evident.

MyBroadband previously calculated that the changes would increase the monthly electricity bills of people using 450kWh per month on the most common residential electricity tariff by 22.3%.

Households using less than this will see an even higher increase.

Even those with more moderate usage of 600kWh will pay 16.1% more.

Due to the scrapping of the IBT, customers consuming 764kWh or more will pay less per month.

Any household consuming less than that amount — which currently costs R2,793 — will see its monthly energy bill increase.

These changes are without the impact of Eskom’s requested electricity tariffs under the MYPD application for the next three years.

The graph below shows how Eskom’s proposed retail tariff plan will impact the bills of Homepower 4 users.

Eskom Homepower 4 bill — Before (2024) and after (2025) retail tariff plan change

Poor also likely to suffer

Many poor electricity users will likely also suffer if the retail tariff plan were implemented.

While indigent households get free basic electricity and reduced tariffs, there are significant shortcomings in how this system is implemented.

Firstly, the 50kWh allocation, which was specified in 2003, is insufficient for modern-day electricity requirements.

The Public Affairs Research Institute found that the monthly allocation should have been 350kWh in 2023.

Furthermore, grossly misgoverned municipalities have not registered all households that should qualify for free electricity.

For example, energy expert Chris Yelland has estimated that between 95% and 97% of qualifying households in the City of Johannesburg are not on the indigent register.

Fortunately, Eskom’s proposed RTP is not a done deal, as Nersa still needs to approve it.

The regulator is accepting written comments from the public on the RTP until 16:00 on 17 December 2024. The day thereafter, it will start holding public hearings.

The regulator will announce its decision on the plan by 30 January 2025.

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