- Eskom's Retail Tariff Plan 2023/24 submission (8.82 MB)
Eskom has submitted a tariff restructuring application to the National Energy Regulator of South Africa (Nersa) in which the utility is proposing a major overhaul of the prevailing retail tariff structure, including a separation of energy, network and service charges and the introduction of dynamic time-of-use pricing.
The application was submitted on August 5 and Eskom is requesting that it be implemented on April 1 next year, together with any adjustments to the tariff rate arising from the regulator’s parallel adjudication of its latest multiyear price determination (MYPD) application,
Nersa has published an MYPD consultation paper – including a proforma calculation indicating that Eskom’s tariff could increase by as much as 38.1% on April 1 – and has indicated that it will make a decision on November 7.
Eskom corporate specialist in retail pricing Shirley Salvodi says the structural changes proposed in its submission are based on an updated cost-to-serve study.
In addition, it outlines the structural changes that Eskom believes to be necessary so as to reflect the changes in the electricity environment, including the unbundling of Eskom into three separate businesses of generation, transmission and distribution, the rise in self generation and the prospect of far greater wheeling of electricity.
The tariff structure was last revised in 2012.
“The tariff restructuring is aligned to the unbundling process that Eskom is going through to accurately reflect the costs of the different services being provided, so that energy charges reflect energy costs, network charges reflect network costs and service charges reflect the cost of customer service and administration,” Salvodi asserts.
Ahead of the release of the ‘Retail Tariff Plan 2023/24’ much debate was sparked by indications that Eskom intended implementing a fixed monthly charge of more than R900 for grid access.
Even though such a charge would be implemented whether or not a company or household had a solar system, concern was nevertheless expressed that the move was designed to penalise those with such systems.
Anxiety persisted even after President Cyril Ramaphosa announced on July 25 that a feed-in tariff would be created to incentivise businesses and households to invest in rooftop solar and despite the fact that several energy experts described as appropriate moves to separate fixed and energy charges.
In its submission, Eskom argues that the correct separation and structure of network charges is needed to ensure that there is a fair recovery of costs by all grid users and so that tariffs more accurately reflect the value of the service being provided and that unintended subsidies are not created.
“To make network charges more reflective of the cost drivers, there will be a gradual increase in the fixed network charge.
“For this submission, the fixed network charge increased to 60% and the variable network charge reduced to 40%,” the document reads.
Eskom is also proposing the introduction of a residential time-of-use (TOU) tariff, called Homeflex, for its urban residential customers, while removing the inclining block tariff structure entirely.
Should it receive approval from Nersa, Eskom will reintroduce a single energy rate charge, fixed and more cost-reflective network and retail charges for Homepower, and introduce a TOU residential tariff with an offset rate for net billing.
The Retail Tariff Plan 2023/24 describes the main aims of the restructuring as being:
- to reflect unbundled costs more accurately, owing to the fact that Eskom argues that the current tariff rates no longer reflect the different services being provided;
- to reflect the changing electricity supply and demand environment;
- to ensure alignment between wholesale purchases and retail tariffs; and
- to mitigate volume and revenue risk by ensuring that the tariff structure reflects the reality that a reduction in sales does not equal a reduction in costs and to ensure that fixed costs can be recovered in the tariffs.
Eskom Distribution group executive Monde Bala argues that the tariff structures need to be modernised to reflect the changing electricity environment, including the fact that customers are installing their own power generators and are using the grid in different ways, while wheeling is increasing.
“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.”
Bala acknowledges, however, that it will not be possible for the changes “to have zero impact on all customers”.
While the total tariff revenue arising from the structural changes stays the same, as it is derived from the MYPD, individual customers may pay more or less, depending on the changes and their consumption profile.
Nersa is expected to follow its normal public consultation process before approving the changes.