Eskom wants South Africans with solar to pay more

Eskom wants South African households and companies trying to reduce their reliance on its supply to pay more for the electricity they use from the utility. 

The power utility plans to do this by increasing the fixed capacity charges, which would disproportionately affect people and companies using less Eskom electricity. 

As South African households and companies reduce their reliance on Eskom through the installation of rooftop solar and other alternative energy sources, the utility risks entering a vicious cycle. 

Some of Eskom’s largest customers, such as mining companies, are cutting their usage of the electricity company, resulting in less revenue for the utility. 

Therefore, Eskom risks losing its best customers who can afford to install alternative energy sources and being left with those who do not pay for its services. 

To mitigate against this, Eskom presented its Retail Tariff Plan in 2021 to the National Energy Regulator of South Africa (Nersa) to change the structure of tariffs. 

Simply put, Eskom wants to significantly increase network costs, which include transmission, distribution, and transformer costs.

These network costs are currently recovered through variable (c/kWh) and fixed (R/kVA and R/Customer) charges.

Eskom wants to move to a tariff structure with significant fixed daily network charges independent of usage.

This means South African households and businesses would have to pay a much higher fixed charge, regardless of whether they use electricity.

This would lead to those with solar panels paying far more than before, as they would need to pay daily fixed costs to Eskom to be connected to the grid.

Eskom CFO Calib Cassim recently explained why the utility thinks this is necessary in response to recent reports that Midvaal municipality in Gauteng plans to dump the utility’s services. 

Cassim said it is vital to understand when a company, household, or municipality dumps Eskom if it plans to do so all the time or partially. 

“The only point we are making with regard to our Retail Tariff Plan is that when a customer says they are dumping Eskom, it must be 24/7/365,” Cassim told Newzroom Afrika. 

“If you are going to use Eskom on a partial basis and you have to come back when the sun is down, there needs to be a cost and a charge for you to tap into Eskom as a battery.” 

“Otherwise, what will happen is that the consumers using the grid all the time are going to pay for the entire infrastructure costs of Eskom.” 

“Then those that come on to the grid on a partial basis will get a free benefit from the infrastructure investment funded by other customers.” 

“If you are going to use us as a battery, then you will need to pay for that.” 

South African households are increasingly looking into alternatives to Eskom’s supply to avoid significant price increases. 

On 23 September 2024, the National Energy Regulator of South Africa (Nersa) released Eskom’s multi-year price determination (MYPD).

Eskom is requesting total revenues of R446 billion for the 2026 financial year, R495 billion for 2027, and R537 billion for 2028.

The proposed average price hikes for Eskom’s direct customers are 36.15% for the period from 1 April 2025 to 31 March 2026.

For the subsequent years, the utility is seeking increases of 11.81% from 1 April 2026 to 31 March 2027 and 9.10% from 1 April 2027 to 31 March 2028.

“This application allows for an improvement in the financial sustainability of Eskom through the migration to cost-reflective prices,” Eskom said.

Since this application was made public, customers and government members have expressed significant opposition. 

Electricity Minister Kgosientsho Ramokgopa has said the government will intervene to provide a measure of relief from these increases. 

“Our electricity pricing plan needs to kick in, and that is the primary preoccupation of the ministry now, working with Eskom’s Distribution division and municipalities,” he said. 

Ramokgopa warned that these price increases are at risk of spiralling out of control and that the government’s policy of providing free basic electricity is not working. 

The head of the ANC’s economic transformation subcommittee and Minister of Human Settlements, Mammoloko Kubayi, has also made it clear that these increases are unsustainable. 

“As we continue pushing forward measures to reduce electricity costs, our commitment to protecting households from unsustainable tariffs is unwavering,” Kubayi said. 

“We are working tirelessly to stabilise the electricity sector and ensure subsidies and protections are in place for those most vulnerable.”

“Electricity must serve as a public good and not an unaffordable luxury. We aim to ensure a stable and reliable energy supply that is affordable for all.”