Electricity pricing and transparency under spotlight

Stakeholders to the commission’s National Colloquium also argued that the free basic electricity system should be made more generous.

The Climate Commission recommended that government urgently address pricing reform throughout the country’s electricity value chain. This is contained in the commission’s Electricity Planning Recommendations Report publicised this week.

“Currently Eskom is not able to recover its full costs, which leads to borrowing to cover operational expenses, often diesel supplies. This is unsustainable and leads to spiralling energy availability factors as Eskom pushes assets harder to meet demand and earn revenue and is unable to adequately fund maintenance,” added the commission, maintaining that if the country did not fix the current pricing system, it will be further worsening the current situation in which the poor bear the brunt of
unjust pricing models.

“Electricity access and energy poverty should be included in the pricing reform study, considering the benefits and practicalities that should be taken to overhaul and increase the Free Basic Electricity allocation and ensure that any price increases are not carried by the poor,” said the PCC.

“While tariffs need to reflect the efficient cost of service provision,” continued the PCC, “any increase in electricity prices would negatively impact low-income households and small businesses, reducing their access to electricity and increasing energy poverty.” To mitigate these risks, the commission advocated for low-income households and small businesses to be supported through interventions such as expanding free basic electricity allocation and progressively adjusting tariff structures.

Stakeholders at the commission’s National Colloquium also argued that the free basic electricity system should be reviewed to make it more effective and generous.

Again, the commission held that existing pricing models impacted negatively on the performance of local government, which it regarded as central to electricity planning in the country.

It called for the capacity of municipalities to be strengthened through financial and technical support. As of December 2022, South African municipalities owed Eskom a total of R56.3-billion, with struggling local municipalities such as Maluti-a-Phofung in the Free State, Emalahleni in Mpumalanga and Gauteng’s Emfuleni being responsible for a chunk of the debt.

Argued the commission: “Several municipalities still struggle to deliver basic services, including electricity. It is, therefore, critical for a Just Energy Transition, that municipalities are supported, both technically and financially, to deliver an affordable, secure and sustainable electricity supply.”

According to the commission, this support should be in the form of assisting municipalities with comprehending tariff and business model reform, boosting skills development, improving administration systems to handle feed-in tariffs and energy efficiency interventions, and support in local electricity planning, among others.

The commission further concluded that more spatial approach to electricity planning was necessary to identify and build capacity to locate
early renewable energy construction and streamline bidding and grid access processes.

Latest News