Concern over electricity bill shock due to Eskom tariff changes

By Jamie McKane for MyBroadband

Eskom’s proposed electricity tariff changes could see the electricity bill of average South Africans skyrocket, according to energy expert Ted Blom.

Eskom itself has rebutted these projections, however, stating that while certain customers may pay more and others less, the change will not lead to an increase in its revenue.

The power utility plans to reduce the electricity tariff for the peak winter months and hike tariffs for electricity usage during its summer period.

It has also said it wants to replace the inclining block rate tariff system with a new system that charges fixed network costs regardless of usage and separate electricity usage costs.

The inclining block rate system currently means that South African households that use more electricity pay more per kWh than those which use a lower amount of electricity every month.

Removing this would mean that all households would pay the same per kWh of electricity usage, regardless of how much they use each month.

Potential for massive bill shock – Ted Blom
Eskom has said these proposed tariff changes are being implemented to bring the prices consumers pay for electricity in line with the efficient cost of producing power.

Blom, however, has warned that those who do not use much electricity every month may see a significant increase in their monthly electricity bill.

This is because while Eskom has said it will reduce winter tariffs, it only charges these tariffs for three months of the year. During the rest of the year, it charges summer season tariffs, which it has said it plans to hike.

Blom says that depending on how much these tariffs are altered, this may result in a net increase in consumer electricity bills per year.

Additionally, the introduction of a fixed network cost could see those who use relatively little electricity paying much more than they currently do, Blom said.

This is because they will be required to pay fixed monthly costs for being connected to the electricity grid, and this charge will be incurred no matter how much they try to save on electricity usage.

These changes will be most felt by households that use electricity sparingly, Blom said.

Speaking to eNCA, Blom said households that cannot afford to buy a lot of electricity will face a heavy burden if Eskom goes through with these changes.

“Eskom hasn’t provided the exact breakdown, but as an example – on the first 300kWh of electricity, where you used to pay R1.29 you could now pay closer to R2, and that will double the average person’s electricity bill,” he said.

Some customers might pay more or less – Eskom
Speaking to eNCA following Blom’s statements, Eskom electricity pricing specialist Shirley Salvodi said that the changes to the summer and winter tariffs would be revenue-neutral for Eskom.

“The sum of all the changes we are making equals the Nersa-approved revenue requirements,” Salvodi said. “So by slightly reducing the winter rates and increasing the rates for the nine months in the summer, the sum of the two changes is revenue-neutral for Eskom.”

“But some customers might pay more or less, depending on their profile.”

Regarding the inclining block rate tariff changes, Salvodi argued that the projection that some customers will pay double is not strictly correct.

“The statement made that some customers are going to pay double is a bit misleading,” she said. “There are many customers that are actually going to see benefits from the changes we are proposing.”

In response to questions from MyBroadband, Eskom spokesperson Sikonathi Mantshantsha elaborated on Salvodi’s previous statements.

“The proposed change to our tariffs structure, reducing the three winter months and increasing the nine summer months, is calculated in such a way that the same amount of revenue will be received by Eskom,” he said.

“Eskom will not be earning any additional revenue from this change, and all of the changes must be approved by regulator NERSA.”

Removing the inclining block tariffs and the reasons are clearly spelt out in the power utility’s submission, Mantshantsha said.

“I encourage customers and Mr Ted Blom to read the document, understand the numbers and use the models Eskom has provided on our website.”

Mantshantsha added that customers who do not use a lot of electricity will not be required to pay these fixed charges.

“A point to note is that Eskom is not proposing to introduce fixed charges for low consumption customers, so there is always this tariff option available for these customers,” he said.

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