Eskom bids to tariff privately produced energy.

On January 25th of 2021, South African's power and utility company, Eskom, announced that it plans to tariff the production of renewable energy sources like solar within private homes.

The energy giant proposed its retail tariff plan at a hearing hosted by the National Energy Regulator of South Africa (NERSA). The retail plan, which is a broad financial structuring of the years of 2021/2022, was a finalised draft of their plan released in August of the year prior.

The last time Eskom restructured its tariff plan was in 2012.

Using a cost-to-serve analysis, Eskom concluded that the proposed changes within the plan were needed to mitigate losses suffered by a changing environment that saw consumers disassociating with the company as well as the advent of changing technology and consumer needs.

Shirley Savoldi, Eskom's corporate specialist, stated at the hearing that the plans were redrawn to ensure that tariffs reflected volumes and divisional costs more accurately. She emphasised that the tariffs were meant to specifically address structure and cost allocation and not an attempt to raise earning returns.

"Tariffs need to be updated and modernised to reflect the changing environment and to protect customers and the industry," added Savoldi.

How and why

Along with some other notable changes Eskom plans the removal of Inclining Block Tariffs - This used to mean that homeowners would pay more for electricity as they buy more. 

Eskom also plans to have owners of solar power units pay charges on capacity. This, they state, is because they are still functionally using the grid and must pay what they deem to be a fair and subsidised cost for its continued use.

The reasoning is that customers who use the grid need it to provide a stable flow of power and thus are obliged to pay for their fixed capital costs. They further state that consumers who produce private energy are now being subsidised by those who continue to use the grid without it.

Eskom has emphasised that any reports alluding to the idea that solar power users will be paying MORE in tariffs is "factually incorrect." All customers will be charged the same tariffs whether they produce solar or not. This, they believe, is to ensure that tariffs accurately reflect energy, retail, and network costs.

"It's not that Eskom wants more money from their customers. They just want to implement a fair tariff," says Paul Vermeulen, Chief Engineer of renewable energy at City Power.

The major contention Eskom has is that fixed charges were missing from the prepaid tariff system. This, they state, is an unfair system that sees those who own renewable energy systems, and who produce the same kHw, paying the same as those who don't.

"The person who owns a renewable system will not be paying their fair share to maintain the grid," Vermeulen added.

Growing opposition 

The Democratic Alliance (DA) has filed their response to Nersa regarding Eskom's proposal.

DA MP, Ghaleb Cachalia, believes that the proposal would "punish solar users" and see to it that all homeowners who produce private energy would receive hefty penalties making it more expensive for them to produce power than to simply buy it.

He further went on to state that Eskom's "anti-competitive" behaviour was reprehensible and could violate South Africa's competition rules. Cachalia is convinced that Eskom is simply trying to bully private producers by increasing the cost of Solar power.

Between the lines

Professor of Science and Technology and Senior Scholar at UCT, Anton Eberhard, states that anyone who is both grid-tied, uses private energy, but does not feedback power produced is likely not paying their fair share of maintaining the grid. This is indeed a growing concern with private energy production.

However, those with private power solutions who used personal battery storage devices to feedback on what they produce were not being adequately subsidised nor were they being compensated for their role in producing power and contributing towards the mitigation of Loadshedding.

He further added that consumers who do not receive fair compensation for their energy production will most likely abandon the grid altogether. If this trend begins to unfold, then lower-income homes will suffer the costs that are subsidised by middle-income homes if they leave the grid altogether.

Vermeulen ultimately believes that allowing homeowners to produce energy privately is vital to help offset the energy crisis South Africa is currently experiencing.

"As an industry, we have slipped up. We haven't informed our customers of the value of the grid... It's a kind of insurance for the rich customer. Even with load-shedding, the South African grid is still very good," Vermeulen added.

Jury still out

Nersa made a public statement following Eskom's proposal stating that everything within the preliminary hearing remains exactly that; preliminary. Nersa wishes to conduct a strong investigation into the proposed tariffs and will make a ruling at a later date this year.

Nhlanhla Gumede, Nersa's regulatory member responsible for electricity relations further explained that the process will take some time and that the regulatory body will engage with stakeholders before coming to a final decision.

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