Solar power won't be "free" as Eskom wants its share of the pie

Eskom is working on a proposed radical tariff restructure as home solar installations gather pace, according to Moneyweb.

Eskom has proposed that households pay a far greater portion of their bills in the form of fixed charges related to the supply of electricity (currently these are bundled into the price per unit of power).

This would see many of the suburban residential customers serviced directly by the utility, paying hundreds of rands per month before using a single kilowatt-hour (kWh) of electricity.

Helen Ward, Principal of Helen Melon Properties, says it is unclear at present how these new measures will be structured practically, but the bottom line is all electricity users will still have to pay for the fact that electricity is provided "to their door", in spite of self-generating solar power.

Eskom's proposals were submitted to NERSA, South Africa's national energy regulator, and NERSA has been urged to show caution in the direction it was taking.

The Minerals Council South Africa earlier this month advised NERSA to stop its "unwise" and rushed overhaul of the way electricity tariffs are determined in South Africa.

Addressing a NERSA panel on the proposed new methodology that it is currently consulting stakeholders on, Minerals Council technology analyst Christian Teffo said it is not ready for implementation, and it is unfair to expect stakeholders to accept an incomplete methodology on the basis of principles only, without knowing what the impact will be, according to Moneyweb.

The proposals may see large users who are planning their own generation to help alleviate the supply shortage being penalised for their efforts.

Dr Leslie Rencontre, director of electricity at the City of Cape Town, has said that municipal legislation does not allow for in-year adjustment of tariffs. He raised concern that municipal laws have not been properly taken into account in the development of the NERSA proposal.

He stated that the proposal is dependent on smart meters, but it will require a large investment to move to smart meters. It is the City of Cape Town's policy to switch to prepaid meters though, because of the benefit that clients pay revenue upfront and the municipality avoids bad debt.

The benefits associated with smart meters will not outweigh those of prepaid sales, he said.

Eskom, in a major overhaul of its tariff structure, says it plans to reintroduce a service and administration charge levied per day for the provision of its service.

While Eskom doesn't state explicitly that the changes are due to the increasing proliferation of rooftop solar at residential properties, it will force those customers on to a new time-of-use tariff.

These changes are included in its 121-page submission to energy regulator NERSA for the restructuring of its tariffs from its next fiscal year in 2023/24.

Eskom, according to Moneyweb, says "existing tariff structures are outdated and need to be modernised to reflect the changing electricity environment and crucial decisions in this regard need to be made to protect the electricity industry".

"For example, it is no longer appropriate to recover fixed costs only through variable kWh-based charges."

It argues that the unbundling and restructuring of tariffs "will remove artificial subsidies, provide greater transparency of costs, ensure the correct economic signal, and reflect a more accurate payback period by comparing the energy cost of the utility versus the energy cost of the alternative and not including network cost bundled with the energy in the analysis".

At 0kWh, indicative charges (based on current tariffs) are R938, R1508, R3408, and R562 on each of the Homepower tariffs (1/2/3/4), respectively. Homepower tariffs are based on supply sizes. Suburban households would likely be on Homepower 1, with even larger properties on Homepower 2 or 3. Homepower 4 is for smaller/lower income households.

Beyond these changes, Eskom will also seek to - over time - migrate all customers (except low-income households) to time-of-use (TOU) tariffs.

It says because subsidies as well as demand and capacity charges are bundled into the price per kilowatt hour, this "creates further incentives for customers to deploy onsite generation and 'escape' ... high energy charges.

Eskom says the "System Operator has also recognised the impact of PV [photovoltaic solar] on the system and how dispatchable plant (mainly coal plant) will have to be used to manage the impact that renewables will have on system operations".

"For example, customers using SSEG [small-scale embedded generation] systems such as PV will reduce the energy in the system during the day but will not change the current morning and evening peak period system demand," it explains.

It has finalised plans for a new residential time-of-use tariff, Homeflex. It says this tariff will be "mandatory" for all Eskom-direct customers who have grid-tied generation (solar), whether they intend to export power to the grid or not. Other residential urban customers can elect to convert to this tariff.