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Eskom's Retail Tariff Plan Could Increase Costs for Low-Usage Households

Published November 22, 2024
2 months ago

Eskom's latest proposal to amend its retail tariff plan (RTP) may lead to higher electricity costs for small to medium South African households, prompting widespread concern. Under the proposed amendments, households and businesses that consume less electricity could end up paying disproportionately more, while higher consumers could benefit from lower rates.





Currently, Eskom is seeking approval from the National Energy Regulator of South Africa (Nersa) for these changes as part of its multi-year price determination (MYPD) strategy, which includes a controversial request to increase electricity tariffs by a total of 66% over the next three years.


The amendments involve redefining the structure of fixed and variable charges, with a higher proportion of revenue coming from fixed charges. This shift aims to address Eskom's argument that solar power users, who partially rely on the grid, pay less than their fair share for infrastructure costs. However, this restructuring is poised to raise fixed electricity charges for all users, regardless of their consumption levels.


Critically, the proposed elimination of the Incline Block Tariff (IBT) system—which currently increases rates as electricity usage goes up—means that those using less electricity would face steeper bills while high consumption decreases in cost. Eskom claims this approach would make billing fairer and that the average user would save money. Nonetheless, this claim is contentious. Various energy analysts and surveys, such as those conducted by MyBroadband, show that the average household consumption is far below Eskom's assumption of 900kWh per month. Calculations suggest figures closer to 450kWh, with many households using significantly less.


For households consuming under the current average costing threshold of R2,793 – which equates to approximately 764kWh per month – the RTP plans would result in substantial bill increases. Those using around 450kWh per month might see their bills rise by over 22%, and even more for lower usages.


The proposed tariff plan also neglects considerations for lower-income and indigent households. While there are policies in place for free basic electricity allocations, these are often inadequately implemented, with the majority of qualifying individuals not registered due to municipal mismanagement.


Eskom's approach has been criticized for potentially deepening economic disparities by raising costs on those who can least afford it, particularly at a time when inconsistent power supply has pushed many towards supplementary solar usage.


As the deadline for public comments closes on December 17, 2024, Nersa will begin reviewing these inputs before hosting public hearings. A final decision from Nersa is expected by January 30, 2025. This decision will be crucial in determining whether Eskom's RTP amendments are implemented and how they will reshape the financial landscape for electricity users across different demographics in South Africa.


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