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Last week a potential new electricity policy was published by the Department of Mineral Resources and Energy for public comment, following approval by the president’s cabinet published. The proposed plan covers new pricing strategies and means of energy distribution and is 124 pages, which is really long, so let’s summarize it.
The document outlines a new approach to handling and determining electricity tariffs in light of the generation market being opened up to private power generators in the coming years. The plan also makes a plan for the establishment of a separate independent transmission company under Eskom, which will allow for the sharing of electricity through different providers. The creation of this transmission company would represent a powerful step towards a competitive and diverse generation sector, where multiple parties have access to the grid. Ideally this will create a new electricity market where buyers and sellers can trade.
This is expected to help alleviate the energy crisis South Africa is facing by taking demand away from Eskom’s outdated coal power stations, allowing South Africa to progress towards a future where we rely more on renewable energy.
Regarding pricing, the proposed policy emphasises cost reflexivity, meaning users should pay a tariff in line with the amount it costs to provide them electricity. It is believed that the tariffs should reach cost reflexivity within five years of being implemented. There will be specific tariff categories that this won’t apply to and will instead be cross-subsidised. This will be done primarily to help disadvantaged households.
In addition to the standard range of products the document also states there should be certain special electricity products and prices:
- Curtailable and interruptible rates offering repayments to customers to reduce consumption in very high demand periods or when capacity is constrained.
- Critical peak pricing tariffs with certain periods having very high tariffs, such as when the system’s reliability is threatened, and lower tariffs during other times.
- Real-time pricing products with rates provided ahead of time (usually hourly or daily).
- Short-term flexible products and services to meet supply and demand.
- Green energy tariffs to encourage customers to support green technologies in the energy market.
The National Energy Regulator of South Africa (NERSA) have already begun reviewing the policy. There has already been some disagreement between NERSA and Eskom. NERSA is saying that consumers who only use Eskom power during peak times are more expensive and should therefore be charged more while Eskom is saying it is not possible to detect which users were drawing electricity from which power stations at any point in time. Eskom has instead proposed a fixed capacity charge for almost all electricity users to account for the extra cost of servicing self-generators.
The new policy also calls for the publication of a long-term outlook to give customers enough time to prepare their budgets accordingly. The forecast would be indicative and not binding.
These are exciting developments that could lead to a better future for South Africa and its citizens.
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