Power lines feed electricity to the national grid
Power lines feed electricity to the national grid from Koeberg Nuclear Power Station. (Photo by: Education Images/UIG via Getty Images)
  • Eskom wants to change its tariff structure, and presented its new plans to the regulator on Tuesday.
  • The changes include a move away from block tariffs for households – where the more electricity you buy, the more expensive the power is.
  • In the end, this will mean households that consume less power will pay slightly more and higher-consumption households will pay less than in the current structure.
  • Also, it is proposing changes to its peak hours, when electricity costs more.
  • For more articles, go to www.businessinsider.co.za.

Eskom presented a new plan to change its electricity tariff structure, which could see big changes for both businesses and households.

At a public hearing of the  National Energy Regulator of South Africa (Nersa), Eskom’s pricing specialist Shirley Salvoldi stressed that the power utility won’t earn more from these proposed changes to its tariff structure than was permitted by Nersa’s approved tariffs, Netwerk24 reports.

Instead, Eskom believes the tariff changes will reduce inadvertent cross-subsidies, as well as update and modernise its fee structure.

The proposed changes include:

1. A move away from Incline Block Tariffs.

These block tariffs mean that electricity gets pricier as a household buys more. The first block of electricity bought in a month is at the lowest price. When you purchase more electricity during the month, the power will eventually fall in “block two”, which is more expensive. 

Eskom says IBT is very unpopular among its residential customers, and confusing to understand. It also makes it difficult for households to budget, and doesn’t allow them to pre-buy for months ahead when money is available (like with a December bonus).

In many poorer areas, a couple of homes may also use a single electricity point, which means that because they use more together, they all have to pay higher tariffs.

“By moving away from an IBT structure, there will be an impact in that lower-consumption customers will pay slightly more and higher-consumption customers less,” Eskom said.

2. Changes to time-of-use tariffs.

These tariffs mean that electricity used during some peak-demand times (and in winter) is more expensive. Salvoldi says this tariff structure was last reviewed in 2005, and hasn’t kept up with provision of solar power. Currently, Eskom is seeing a fall in demand for its electricity in the day time because of solar power feeding into the grid when the sun shines, Netwerk24 reports. But demand then increases at night, when the solar supply starts falling away.

Accordingly, Eskom wants to increase the evening peak to three hours (from two hours) and reduce the morning peak to two hours (from three hours). It also wants to introduce a two-hour "standard" period on a Sunday evening.

Eskom also plans to reduce its peak rates in the high-demand season of winter, but hike its rates in summer (low demand season).

The proposed new Eskom time periods where 1 (red) is peak, 2 (yellow is standard and 3 (green) is off peak. High refers to the colder months and low to summer months.

3.  Simplifying municipal tariffs 

Eskom wants to reduce a raft of municipal tariffs to only three: one for large power users, one for smaller users and one for public lighting. There won’t be any difference between urban and rural tariffs, according to its new plan.

4. A new way to calculate the rate at which electricity is bought from small producers 

Some municipalities are now allowing commercial property owners, as well as households, to feed renewable energy back into the power grid. 

READ | You can sell excess solar power back to govt – but it may take around 7 years to break even

But Eskom says they prices they are getting for their electricity must reflect the cost of using the grid. 

“Tariffs that recover both fixed and variable costs through volumetric energy (c/kWh) charges, no longer reflect a changing energy environment, e.g. a residential tariff with only an energy charge of R2/kWh makes alternate energy sources look very attractive,” according to the Eskom presentation. “However, only R1 kWh is actually only energy costs and the rest fixed costs - should only be competing against R1/kWh and not R2/kWh.”

It proposes that the R2/kWh charge is split into network (fixed daily charge) and energy (volumetric c/kWh).


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