Eskom wants to punish people for using less electricity

Despite sugarcoating by the country’s electricity regulator, Eskom’s recently approved retail tariff plan (RTP) will ultimately punish people who use less grid power, not “enhance” their electricity affordability.

On 22 February, the National Energy Regulator of South Africa (Nersa) announced it had approved Eskom’s RTP 2025 with a few adjustments in the timeframe for implementation.

The RTP includes a plethora of changes in the way that Eskom calculates tariffs.

The biggest change is the introduction of higher fixed charges independent of consumption — including a fixed Generation Capacity Charge (GCC) levied per day and per Eskom point of delivery (POD).

That will result in many households with low to moderate electricity consumption seeing an increase in their bills.

This will be in addition to the increases that will take effect as a result of the above-inflation annual hikes, also approved by Nersa.

The RTP will benefit most average and heavy electricity users, who will be paying less on their bills due to the scrapping of the Incline Block Tariff (IBT) pricing structure in favour of flat tariffs.

In its summary of the impact of the changes on households, Nersa said that the removal of the IBT structure for Homepower and Homelight tariffs simplified the pricing model and will have a “positive impact” on low-consuming customers.

“Transitioning to a single energy rate structure will enhance affordability for many households, promoting a clearer understanding of energy costs,” Nersa said.

It would be hard not to label this interpretation as disingenuous at its best and blatantly misleading at worst. Lower consumption users are precisely the customers who benefited from lower tariffs under the IBT.

The IBT was designed to make tariffs for small households more affordable and to reward responsible power usage while Eskom’s generating fleet was under constraint.

While many people argued this model was backwards compared to other businesses that typically reward buying products in bulk, the reality is that Eskom’s generation can still not keep up with demand.

Considering Eskom is not yet in a position to declare an end to load-shedding, encouraging higher usage seems counterintuitive to helping the fleet recover from years of neglected maintenance and the slow build-up of new generation.

Although it can be argued that a flat tariff eliminates complexity in pricing structures, it also does not “enhance” affordability for lower-consumption users, especially when coupled with increased fixed tariffs.

Eskom’s own RTP submission to Nersa states that removing the IBT and introducing a more “cost-reflective” fixed charge results in lower-consumption customers paying more.

That excludes customers on the Homelight 20A and Homelight 60A tariffs, who will remain exempt from cost-reflective tariffs.

Therefore, the RTP will not reduce or eliminate subsidies; it will simply shift the burden of the subsidies that were historically on the above-average users to below-average users.

The graphs below show how the RTP tariffs would impact bills in the 2024/2025 financial year.

It is important to emphasise that the actual amounts will change as the RTP is only set to take effect from Eskom’s 2025/2026 financial year, starting in April 2025.

RTP Homepower impact

• Homepower 1 — Dual-phase 32kVA and three-phase 25kVA
• Homepower 2 — Dual-phase 64kVA and three-phase kVA
• Homepower 3 — Dual-phase and three-phase 100kVA
• Homepower 4 — Single-phase 16kVA (vast majority of residential users)

RTP Homelight impact (exclusive to poor households)

In summary, the customer segment worst impacted by the changes are those with low to moderate consumption, who are not considered poor enough for subsidised tariffs, and also do not need or cannot afford high consumption.

Typically, these customers are likely to be middle-class and emerging middle-class households.

The development of the RTP is many years in the making but has likely taken into consideration Eskom’s plunging electricity revenue, driven by a shift towards self-generation and private supply due to load-shedding.

Grid-tied solar power users will also be adversely affected by the changes as they are more likely to consume lower amounts of electricity.

Eskom is running the risk of accelerating its death spiral with increased charges to many customers who may have the means to upgrade their systems and cut themselves off completely from the grid.

With a continued decline in revenue, it will be forced to keep increasing prices unless it cuts down on costs — which it has failed to do for many years.

Further increases will push more people away from Eskom and into the arms of self-generation and private power suppliers, which already offer cheaper electricity for many consumers.

The Green Connection has compared Eskom’s increased fixed fees to “charging customers to simply enter a shop, regardless of whether or not they buy anything”.

“This makes no sense, especially since households with self-generation reduce demand on Eskom and contribute to national energy security,” said Green Connection’s Liz McDaid.

“Their tariffs should rather reflect actual backup needs, with higher per-unit charges based on usage during specific periods.”

However, McDaid also warned that time-of-use tariffs would be detrimental to low-income households without batteries, as they cannot shift their electricity usage to off-peak times.