Eskom chasing its customers away

Eskom’s plan to impose an additional levy on solar users who are not completely off the grid will accelerate the utility’s downward spiral. 

This is because it will push more companies and households to cut their reliance on Eskom-generated electricity completely, impacting the utility’s sales. 

The expected decline in sales and revenue will inhibit Eskom’s plans to improve its financial health and force it to push for elevated tariff increases to make up the shortfall. 

In effect, the utility will be squeezing its remaining customer base even harder for revenue, pushing them to find alternative sources of energy and reducing the utility’s sales. 

This is feedback from Organisation Undoing Tax Abuse (OUTA) CEO Wayne Duvenage, who outlined some of the major problems with Eskom’s plans to impose an additional surcharge on South Africans with solar panels. 

Over the past year, Eskom has intensified its efforts to get households and companies to register their solar installations as part of its Small-Scale Embedded Generation (SSEG) programme. 

It is currently running a campaign to get electricity customers to register their small-scale embedded solar installations by March 2026. 

Eskom has previously said this is part of the government’s efforts to ensure compliance with national electricity regulations and maintain grid stability.

As part of this, the utility is looking to implement additional tariffs on independent power producers (IPPs) and small-scale generators to ensure it has funds to invest in the country’s grid infrastructure. 

These charges are likely to be in the form of ‘use-of-network’ tariffs. This will form part of a structure with significant fixed daily network charges levied independent of usage.

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.

The funds generated by these tariffs will be used to fund the maintenance of the grid and distribution infrastructure. 

Eskom CFO Calib Cassim has previously explained why surcharges and penalties are necessary, even for users who want to go off-grid and only use the power utility as backup.

Cassim said that when a company, household, or municipality wants to dump Eskom, it has to do so permanently and not use the utility as a battery. 

“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 said. 

“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.”

Self-defeating

OUTA CEO Wayne Duvenage described this proposal as irrational and self-defeating, with the utility likely to accelerate its downfall. 

The government, through Eskom, has effectively gone from encouraging South Africans to find alternatives to the utility’s electricity to now punishing them for it. 

“We have a situation where we have been asked to reduce power demand and find alternatives through tax incentives, just to find out that Eskom wants to slap on an extra fee for solar,” Duvenage told Classic Business. 

“This is effectively a tax that will be disguised as a fee restructure on these homes or these businesses.” 

The additional fee may put further pressure on Eskom’s grid as South Africans who cannot afford to go completely off-grid rethink their investment in alternative energy sources. 

However, the real threat to Eskom is the South African households and companies that will then invest more in their solar systems to go completely off the grid, leaving the utility with no revenue from these customers. 

“What has happened is that many people who have reduced their reliance on Eskom but are not quite fully off the grid are now going to weigh up how much it costs to completely avoid the utility,” Duvenage said. 

“If this is another R500 or R1,000 a month coming on their bills from Eskom’s fee, then it becomes financially viable to take out a loan to expand their system to go completely off-grid.” 

Duvenage said the reductions in the cost of technology, particularly solar panels and batteries, will make this option even more attractive for South Africans. 

“So I think it is a bit of a self-defeating spiral in the wrong direction, with Eskom’s aim to generate more revenue likely to result in losing paying customers.” 

This is likely to result in Eskom having to squeeze its remaining customer base even harder to cover its rising cost of electricity production. 

This, in turn, makes alternative energy sources more attractive to South African households and companies, as they become financially viable for more of Eskom’s customers.