It looks like South Africans will either sigh a breath of relief or have to dig a little bit deeper from 1 April 2023 when Eskom’s new proposal is set to be approved by the National Energy Regulator of South Africa (Nersa).
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Eskom submitted its new tariff plan in a proposal to the National Energy Regulator of South Africa (Nersa) on Friday, 5 August 2022.
Eskom Group Executive for Distribution, Monde Bala said, “Existing tariff structures are outdated and need to be modernised to reflect the changing electricity environment, and crucial decisions in this regard are needed to protect the electricity industry.
“For example, customers are installing their own power generators and are using the grid in different ways, and the wheeling of energy is also expanding. Fair and equitable revenue recovery from all customers for the services provided can only happen with tariffs and tariff structures that are modernised to reflect this changing environment.”
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The new proposed tariff and implementation of the changes will account for the restructuring of the power plant, as well as to gauge the way costs are recovered by each division – generation, transmission and distribution. It will also ensure that fixed costs are fully recovered. Currently, fixed cost recovery is based on the volumes of energy sold (cents per kilowatt hour).
The problem with the current method is that a reduction in electricity sales reduces the revenue but not the costs to generate the power which still have to be covered by Eskom. The power utility is proposing that customers pay for using the grid and its generation capacity.
Eskom describes its proposed plan as a rebalancing exercise and states that it will not be earning more revenue but rather restructuring revenue.
Eskom stated that customers would be impacted differently by the changes and may either see an increase or reduction in their bill according to their consumption profile.
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The key changes that will affect residential customers include the following:
Eskom will modify the inclining-block tariff:
The Inclining-Block Tariff (IBT) is the fee that customers pay when their electricity consumption is above a certain threshold. Eskom has now found that this tariff encourages customers to seek alternative power solutions which leads to Eskom losing revenue as a result.
Eskom is proposing that the IBT is structured so that consumers without solar PV subsidise those that do have Solar PV installed. Eskom says that it will incentivise higher-consumption customers to install solar and that these customers are subsidised by those without solar.
Removing the IBT for residential customers and implementing a more cost-reflective tariff structure will correct the unfair subsidies customers are receiving.
Eskom creates a time-of-use tariff for residential customers:
The time-of-use tariff will be called Homeflex and will be targeted and suitable for medium to high-usage residential customers who have the ability to shift load from the expensive peak periods to the less expensive off-peak periods
Eskom said that consumers using Homeflex will also pay a network capacity charge aligned to the size of the connection as well as an administrative charge that applies whether electricity is used or not. This tariff is more ‘cost-reflective’ in its structure, according to the power utility.
This new tariff will require a post-paid smart meter which the customer will have to pay for.
Residential customers will be credited for feeding power back to the grid:
Eskom’s residential customers will now be able to benefit from its ‘net-billing system’, a system which is already in place with its commercial and industrial customers. The net-billing system credits the customer with energy exported. Eskom does not buy the energy but uses it and then refunds it at the end of the month.
This system works as an incentive as well to keep consumers connected to the grid if only even for a percentage of the time, as this would contribute to revenue loss to Eskom.
Customers have to register to be able to feed power to the grid.
Homeflex is mandatory for Customers using alternative power supplies:
Homeflex tariff will be mandatory for those using alternative power supplies like solar PV rooftop installations.
While the tariff will give signals for consumption, generation and battery use throughout the day, the time-of-use tariff will incentivise customers to make use of off-peak periods to charge their batteries so as to reduce consumption during high-demand periods. Customers will be credited at a lower rate for any power fed to the grid during off-peak or standard periods. The net-billing rates will also be linked to time-of-use.
Residential customers could see a reduction in electricity costs:
Eskom states that the revenue it receives from the new proposed Homeflex tariff should not differ from the existing Homepower tariff, provided the customer’s electricity consumption does not change. Customers opting for the time-of-use tariff should experience a reduction in their electricity bills.
Although this will result in revenue loss for Eskom, it does offset the costs the power utility will avoid.
Eskom will now apply a service charge for every point of delivery:
Eskom wants service charges now to apply to each Point of Delivery (POD) and not to each account as is currently the case.
“The rationale is that a customer could have many PODs under one account and pay the same service charge as a customer with one account and one POD. This is not equitable or fair, as more retail resources are used where there are multiple PODs to one account.”
Customers who have many PODs under one account would see an increase in rates, while customers with fewer PODs per account could see a reduction in rates.
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Picture: Facebook /Kobus Genis