Eskom wants South Africans with solar panels to pay more for electricity

South Africans with solar panels are likely to end up paying more for electricity if Eskom gets its way and implements additional surcharges to ensure it can adequately invest in distribution infrastructure. 

This comes after South African households and companies have invested billions in alternative energy sources to mitigate the impact of load-shedding and reduce their reliance on Eskom. 

The government initially encouraged this investment through tax incentives, which helped reduce the pressure on Eskom and stave off load-shedding. 

However, the rapid uptake of these alternative energy sources has impacted Eskom’s sales and increased its need to invest in expanding and upgrading the national grid and distribution infrastructure. 

As a result, the utility is looking to implement ‘use-of-network’ tariffs to maintain its financial viability and give it the funds necessary to invest in infrastructure. 

Organisation Undoing Tax Abuse (OUTA) CEO Wayne Duvenage believes the targeting of solar users is a step too far from the utility and threatens to accelerate its financial decline. 

Duvenage described the potential imposition of additional levies as a tax on solar users, which would be a fee restructuring for these homes or businesses. 

“What they are doing now is coming down harder on people who are minimal users, assuming they have alternative energy sources, and may catch other users in the crossfire,” Duvenage told Classic Business. 

“Everybody is currently picking up these fees, but now you are saying that you will charge people with solar a little bit more because you are in a different category.” 

Duvenage said that this will result in prejudice directed at one group, with solar users expected to pay an additional fee to fund grid maintenance. 

“The counterargument is, what about the homeowner who installed geysers and gas stoves to reduce their reliance on Eskom, but still uses the utility’s electricity?” he questioned.

“Do they fall into this special category? Of course not, because it is more difficult to measure and generate revenue from.”

“They are just talking about solar here. There are so many unanswered questions which need to be answered. Otherwise, it becomes prejudiced to one party and not others, and that is where legal challenges will come in.” 

New tariffs needed

Recently, the Organisation for Economic Co-operation and Development (OECD) explained that Eskom needs to update its tariff structure. 

It said that the rise of renewable energy will change how the utility generates revenue, and thus, it will have to change how it charges customers who have invested in renewable energy. 

With the increasing using of renewable energy, both at small-scale and utility-scale, there is a need to update the country’s tariff structure. 

It explained that new ‘use-of-network’ or ‘wheeling’ tariffs are needed. Currently, Nersa does not regulate these tariffs, which are left to municipal discretion. 

The absence of national legislation and clear regulation will hinder the growth of electricity supply from IPPs and small-scale generators. 

Progress in this area is underway, with the National Wheeling Framework published for public consultation in August 2024.

To process the large volume of billing data, end users’ meters and municipalities’ digital capabilities need to be significantly upgraded. 

The OECD said higher cost-reflective tariffs combined with short-term targeted financial transfers could help cover the costs of these investments.

Professor and energy expert Vally Padayachee explained that there will be a surcharge placed on solar users, the only questions are how, when, and how much. 

“The fear that Eskom and municipalities may institute a surcharge on South African households with solar is not unfounded,” Padayachee said. 

“There will be a payment, and it will be for the upkeep of the grid and maintenance of distribution infrastructure by Eskom and municipalities.” 

The amount to be paid will vary across municipalities and Eskom, depending on what they deem necessary for investment in maintenance and infrastructure development. 

As part of its Retail Tariff Plan, Eskom has proposed significantly increasing network costs, including 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 significantly more than before, as they would need to incur daily fixed costs to Eskom to remain connected to the grid.