By Hanno Labuschagne for MyBroadband
Eskom has slammed the National Energy Regulator of South Africa (Nersa) principles document on electricity supply prices that could see solar panel users pay up to 10 times more for electricity than the country’s biggest power consumers.
The principle document is supposed to form the basis of a radical new electricity pricing methodology that the regulator wants to implement for Eskom’s tariff applications from the next financial year (2023/2024).
One of its significant proposals is that users be divided into three different types of load profiles, namely:
- Baseload profiles with constant power demand likely being 100% grid-based. These are primarily industrial customers like mines.
- Day or mid-merit demand profiles, supplied by own or embedded generation through solar and wind. Will be on- or off-grid.
- Variable load profiles, which will include peak demand and grid-based backup.
Nersa wants the variable load profile to be distinguished from the other two as it “requires expensive sources of power generation”.
This load profile would apply to households with solar power during the day but who need to tap into Eskom’s grid during peak hours.
Nersa holds that this load profile should not be “socialised” as it would “cynically” transfer price pressures to poor households who can’t afford self-generation.
In addition, it contends the costs of supply to these load profiles are further offloaded to big industries that have baseload profiles, with consistent demand that did “not actually contribute to costs”.
“The tariff for variable load is likely to be in the order of 5-10 times the baseload tariff, depending on the economies of scale achieved, which will largely be a function of the load profile and technology used to the supply load,” Nersa said.
The regulator also contends that separating baseload and mid-merit supply from variable load would support the government in providing affordable and free basic electricity to indigent households.
Electricity connections in a township
But Eskom has said the proposed principles could not, on their own, be used to determine revenue or tariffs.
“It deviates from a well-established process of first determining revenue, based on a clear methodology, then doing a cost allocation of this approved revenue to customer classes and then designing tariffs,” the utility told MyBroadband.
Furthermore, the principles did not comply with the government’s Electricity Pricing Policy nor Nersa’s own tariff codes, which deal with cost allocation and tariff design.
It warned the changes would increase the tariffs for most customers, including municipalities who resell to households, because it assumes variability will be paid by all non-baseload customers.
Core to Eskom concerns was the splitting of load profiles, which it maintained was impossible and impractical.
It suggested that Nersa does not appear to understand the fundamental workings of electricity.
The utility said Nersa implied that certain linkages between consumers and sources of electricity were possible, which was not the case.
“An example inferred in the principles is that it is possible to follow an electron — from a power station to a particular customer: This is not at all feasible,” Eskom said.
“At its most fundamental, the entire power system is oscilliating in synchronism,” the utility explained further in its submission on the principles. “All power plants supply all [of the] consuming customers at a particular point in time.”
“As demand for electricity increases, more expensive generation must be dispatched to meet this demand.”
“The last generator dispatched does not exclusively supply the last consumer requiring power, but both now participate, simultaneously, with all other generators and consumers at that moment in time.”
Therefore, a power provider cannot assume that ‘baseload’ generation can be allocated only to apparent baseload customers.
Like Nersa, Eskom supports that tariffs should be unbundled and cost-reflective, but its approach is simpler — add a capacity charge for almost all users.
This was its argument in a tariff plan submission to Nersa made in August 2020, to which the regulator is yet to respond.
“Rebalancing of tariffs by recovering capacity based costs through capacity charges and usage-based costs through usage linked charges will ensure a fair and transparent recovery of costs and reduce unintended cross-subsidies,” Eskom explained.
The capacity charge would be levied on most customers, except Homelight users.
For smaller customers, it will be a fixed R/day charge and for larger customers a R/kVA charge.
Eskom’s tariff proposals also include a time of use tariff for residential users, which could be used to address peak demand issues, as well as a net-metering rate to compensate customers for energy exported onto the grid.
Furthermore, Eskom proposed the eradication of the Incline Block Tariff (IBT).
Because this was based on the existing revenue at the average consumption to determine a single energy rate, the average customer would pay exactly the same as on IBT, Eskom stated.