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Written by Robert Stirling

It is finally 2021 and everyone is eager to put 2020 behind them. New Year’s messages were full of hope and good wishes for the coming year. Yet, the year started on a negative note. January began with worse Covid figures than ever before and there were rumours of stricter lockdowns.

Then came the news that Koeberg Unit 1 had to be shut down earlier than planned for maintenance and that Stage 2 loadshedding was being sheduled. In all, an underwhelming start to 2021.

Of course, a new year also means tariff changes for many service providers, including Eskom.  So will Eskom’s new tariffs, which are proposed to be implemented from 1 April 2021, follow the negative theme? Are there some positives in the proposed tariffs?

South Africa’s power company has detailed their tariff restructuring plan on their website and some interesting details emerge.

A CHANGE IN MINDSET?

According to Eskom’s retail tariff plan, this year’s proposed changes are being based on a cost-to-supply (or cost-to-serve) study for the first time since 2012. Apparently, the driving factors behind the study are the changes in technology, customer needs, the planned unbundling of Eskom into separate divisions, and the fact that the National Energy Regulator of South Africa (NERSA) has requested that tariffs be based on the cost to supply (CTS).

Eskom claims that the proposed tariffs and changes to pricing structure are based on this study. The tariff plan also states that the aim is to simplify and modernise the system.

WHAT ARE THE MAJOR CHANGES?

Probably the biggest change for home consumers will be the removal of Inclining Block Tariffs (IBT).

The retail tariff plan states, “Residential tariffs need an overhaul. IBT as a tariff structure is no longer appropriate due to customer perceptions and provides uneconomic incentives for customers that install embedded generation.

“Eskom proposes the removal of the IBT structure, the reintroduction of a fixed, more cost-reflective network and retail charges for Homepower, and the introduction of a time-of-use (TOU) residential tariff with an offset rate for net billing.”

While Eskom claims this change will be revenue neutral, they do state that individual customers may find they end up paying less or more than before. The removal of the block tariffs to a fixed cost system will undoubtedly change the way many home users manage their electricity though, since the rate will not change in the month as your number of purchased units goes up.

The South African Local Government Association (SALGA) responded to this part of the proposal with some concern.

Their input, as quoted in the tariff plan, reads, “The proposed changes to the residential tariffs are significant.  A residential customer with an 80A connection will go from paying R190/month + 145c/kWh for the first 600 units to R490/month + 133 c/kWh. This means that customers consuming more than 1200 kWh per month will see a reduction in their monthly bill but customers consuming 300-800 kWh per month will see an increase of roughly R300 per month.”

Considering the above effect on tariffs, home consumers may want to familiarise themselves with the proposed TOU changes.

Eskom claims that these changes are in response to requests to reduce winter prices without creating a knock-on effect that would increase summer rates. Whatever the reason behind it and whatever the season, wise use of electricity during peak and off-peak times may help reduce costs significantly. To help you in your planning, here is a table, provided in the retail tariff plan fact sheet, showing the existing TOU rates and the proposed changes.

LOOKING TO THE SUN

Eskom also claims that the proposed tariff changes will provide more correct and economic signals when making alternative energy choices.

SALGA commended Eskom on this while still expressing further concern, “The Homeflex tariff is a clear indication that Eskom intends to allow customers to install SSEG on their low voltage networks.

“The proposed changes to the TOU rates, namely the reduction in standard period tariffs and the increase in off-peak tariffs, along with the removal of the last morning peak hour, means that the value of avoided purchases from solar PV own generation will be reduced. While it is understood that this is not intended to be an “anti-renewables” move, but rather to support the connection of alternative resources in a responsible way, it does have the potential to significantly hamper the uptake of Small-Scale Embedded Generation (SSEG).”

Eskom responded, “Eskom does not agree that the changes will hamper the uptake of SSEG, but rather that more correct and economic signals are provided when making alternative energy choices. As stated by SALGA above, current tariff structures provide unintended subsidies to customers that make alternative energy choices.”

PLANNING AHEAD

It looks as if 2021 is going to hold some surprises, some of which may be on our electricity bills. CS Online will keep track of any information as it comes available.

Stay charged.

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