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JIMMY MOYAHA: Eskom has introduced its new retail tariff proposal to Nersa. This plan aims to modify how tariffs are structured and add new fixed rate charges. Unfortunately, this change is not favorable for consumers—particularly those using rooftop solar—due to the consequences stemming from these adjustments.

I’m here with independent energy analyst Chris Yelland to delve deeper into this matter.

Chris, it’s always great to have you on the show. Can you outline the new retail tariff plan? What exactly is Eskom proposing, and what has Nersa sanctioned?

CHRIS YELLAND: The new Eskom tariffs were implemented on April 1 this year, impacting all electricity users throughout South Africa.

At the retail level, especially for residential consumers, the repercussions are significant. Essentially, those who use smaller amounts of electricity will face the steepest price increases, while higher consumption users will experience comparatively lower costs.

In fact, some customers may even see their bills decrease this year, resulting in lower monthly expenditures.

This scenario makes residential tariffs somewhat anti-poor, as the reduction of certain cross-subsidies that previously aided smaller customers has led to increased costs for those who were protected, while larger customers benefit.

JIMMY MOYAHA: With tariffs now active as of April 1, Nersa has only approved a 20% phase-in of the fixed tariffs this year. Where will customers experience these fixed non-generation costs, and how severe will it be in the future, especially with reports indicating bills might rise by as much as 75% when all tariffs are fully implemented?

CHRIS YELLAND: To clarify, this part of your electricity bill is known as a ‘generation capacity charge.’ It is a fixed monthly fee aimed at compensating Eskom for sustaining adequate infrastructure to meet national demand, along with reserve capacity for system resilience.

Nersa has only allowed a portion of the proposed generation capacity charge to be added to customer tariffs. This fixed charge will be gradually introduced to prevent sudden financial shocks.

Read: Nersa slashes Eskom’s tariff hike – but consumers might bear the cost in taxes

To illustrate, consider a residential customer utilizing a rooftop solar PV system who minimizes reliance on Eskom. If this customer uses minimal energy from Eskom, they will see a notable increase in their bill once the fixed charge rises by 50% to 70%.

In contrast, a customer consuming a significant amount of Eskom electricity would find that their overall bill is primarily determined by variable costs, making the effect of rising fixed charges comparatively minor.

Consequently, smaller customers will carry a heavier burden in percentage terms, especially those with solar PV systems who significantly reduce their dependence on Eskom.

Listen/read: Eskom’s new solar regulations – Here’s what you should know

In this scenario, smaller consumers shoulder the weight of these hikes.

JIMMY MOYAHA: Chris, let’s explore the fixed costs regarding Nersa’s endorsement of alternative energy providers. Considering Eskom’s legal actions against Nersa, how might this situation impact the fixed charges? Could these alternative providers compete with Eskom, thereby influencing the fixed aspect of the tariffs?

CHRIS YELLAND: Eskom is increasing the fixed portion of its tariffs while reducing the variable part. This strategy aims to secure its revenue amidst growing competition. As a result, even minimal use of Eskom’s electricity will incur a higher monthly fixed cost. Some analysts suggest this approach is anti-competitive, as it enforces a fixed charge rather than a variable one.

Read: Nersa approves restructuring of Eskom tariffs