Tag: tariff

Eskom slams plan to punish solar power users

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.


By Jason Felix for IOL

In a first gut punch for consumers for 2019, Eskom is asking the National Energy Regulator (Nersa) for a 45% electricity increase spread over three years.

Public hearings on Eskom’s demand for a 15% electricity tariff increase over the next three years will start in Cape Town next week and advocacy groups are seeing red, saying government’s timing was a clear sign that it wanted increases pushed through.

This increase is on top of the 4.41% hike that was already granted to Eskom by Nersa. Eskom has argued that this 15% increase was needed to ensure that it maintained its stability and growth trajectory.

But Energy Expert Coalition’s Ted Blom said Eskom’s application should be scrapped as the still-captured and corrupt utility should not be granted any increases until a full forensic audit was completed.

“As we now enter 2019, Eskom is rudderless. The Eskom board has proved to be dysfunctional and required ministerial intervention on several occasions. Although appointed 12 months ago, they were unable to carve out a credible turnaround plan despite the use of expensive outside consultants,” he said.

Last year, President Cyril Ramaphosa intervened in the crisis at Eskom by appointing a team of eight to steer the board in the right direction by January 31 this year.

“The many futile interventions point to an unsalvageable and bankrupt Eskom. In fact, the pillaging is still continuing, this time by another ‘third force’ which has replaced the Zupta gang. Questions remain as to why no one has been prosecuted and no monetary recovery has occurred,” Blom said.

Nersa said it had received Eskom’s third Multi-Year Price Determination Regulatory Clearing Account (RCA) Year 5 (2017/18) application totalling R21 million and fourth Multi-Year Price Determination application totalling R219 billion, R252bn and R291bn for the 2019/20, 2020/21 and 2021/22 financial years respectively.

The energy regulator said that it would assess Eskom’s applications following due regulatory processes.

Eskom said that it continued to implement a short-to medium-term 9-point recovery programme that would see steady and sustained improvement in plant performance and coal stock levels.

It added that steady progress was made with regard to fixing coal stockpiles as 35 new coal contracts were concluded in the last year.

It also said the probability of load shedding remained low until January 13.

Stop CoCT founder Sandra Dickson said the timing of the public hearings showed that the increases should be rubber stamped.

“It is the worst decision to hold public hearings so early in the January. We also need to state that consumers cannot pay these exorbitant increases. It just does not work.

“The average family earns about R15 000 and more. For all that money to go to the City and to Eskom is absolutely criminal. People cannot survive,” she said.

Dickson said although Eskom had problems, its cash flows remained important. “They should get an increase but nothing above the current inflation rate… We need Eskom to run properly but cannot expect people to pay such high rates,” she said.

Public hearings on the increases will be held on January 14 at the Southern Sun Cape Sun Hotel in the city between 9am and 5pm.

Finance Minister Malusi Gigaba said on Tuesday that power utility Eskom’s application for a 19.9% electricity tariff hike next year is “unjustified”.

Gigaba was addressing a business breakfast in Umhlanga, north of Durban, organised by the Durban Chamber of Commerce and Industry.

“To ask South Africans to pay more … when the economy is subdued and the mid-term outlook is as subdued as it is and we have the types of financial and leadership challenges that Eskom is now experiencing, I think that will serve as a perverse incentive,” he said. “We’ve got to be careful what we do.”

Eskom has asked National Energy Regulator (Nersa) to allow it to implement a 19.9% tariff hike for the 2018/19 year. Nersa is currently conducting public hearings into the feasibility of the increase.

Gigaba also called on the power utility to stabilise its finances, saying that public officials needed to be “circumspect” about how they manage public resources.

“All public officials needed to be conscious of the need to fight corruption, irregularities and inefficiencies to ensure that state-owned companies perform well,” said Gigaba.

“That’s why I think that the Eskom application for a higher tariff is unjustified, given the fact that on the other hand we have excess electricity.”

The finance minister told the business breakfast that Eskom must “incentivise” South Africans by improving its governance and employing what he termed “properly qualified executive leaders from CFOs (chief financial officers) to CEOs (chief executive officers) and all other executive directors”.

Mini budget

Gigaba criticised those who said his mid-term budget painted a bleak picture of SA’s economy and failed to boost confidence.

He delivered his maiden mini budget to Parliament in Cape Town last Wednesday.

The minister told the business breakfast that he had to present facts about the state of SA’s economy as they stand. “We gave an honest view of the challenges facing our country. We couldn’t go and spin ourselves to the country knowing all is not well. We couldn’t just go to Parliament and stand before the nation and lie.

“All the things that we said in terms of the country’s economic outlook for the medium-term budget were facts, as they stood before us, when we presented the statement,” he said.

“No minister of finance, worth their soul, would have presented anything different; they would have stated the facts as they are.”

Pay your taxes

Gigaba said everyone needs to pay their taxes, given that SA faces a R50.8-billion tax revenue shortfall.

And with National Treasury expecting GDP growth of only 0.7% this year, Gigaba said that “little social and economic transformation” could be expected without stronger economic growth.

He urged the private sector to join hands with government to boost the economy.

“Economic growth and transformation must become neutrally reinforcing principles. Government is doing its share and will continue doing so,” he said, mirroring what he said in his budget address.

“The private sector must bring something to the table, it must be a give and give situation,” he said.

Speaking of the state’s mounting debt, the finance minister said government doesn’t want to leave future SA generations facing a debt hole they won’t be able to manage.

“We need to give them a growing economy with less debt so that they could begin developing wealth for themselves and grow [the] economy of those who will come after them,” he said.

By Mxolisi Mngadi for Fin24

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