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Eskom Proposes Major Tariff Restructuring for Transparency and Fairness

Eskom, South Africa’s national electricity provider, is pushing for a significant restructuring of its tariff system to align with its phased unbundling strategy. The proposed changes, presented to the National Energy Regulator of South Africa (Nersa), aim to simplify the current system, enhance transparency, and ensure fairness in electricity pricing.
From 10 Tariffs to 3
Eskom’s current tariff structure includes 10 different municipal tariffs divided among its seven million customers. The new proposal seeks to streamline this system into three main categories:
- Large Power Users: Consolidates five existing tariffs for industrial and commercial customers.
- Small Power Users: Incorporates business, home, and land tariffs.
- Public Lighting: Remains unchanged.
By eliminating the block tariff system—where users are charged different rates based on usage thresholds—Eskom aims to reflect the actual cost of service provision more accurately.
According to Onicah Rantwane, Chief Advisor for Electricity Tariffs and Policy Development, “Our tariffs do not currently reflect the actual cost structure of the services provided.”
User-Pay Principle and Revenue Breakdown
Eskom’s new structure is rooted in the user-pay principle, ensuring customers are charged fairly based on their electricity consumption and location.
- Residential Customers: Represent 97% of Eskom’s customer base but only contribute 8.6% of revenue.
- Municipal Tariffs (Urban and Rural): Account for just 0.2% of customers but contribute 44.4% of revenue.
- Industrial and Commercial Users: Make up 0.5% of customers yet pay 38.1% of total revenue.
The new tariffs will factor in a time of use charge (82% of total costs), a generation capacity charge (7%), and a legacy charge (11%), which ensures all users contribute fairly to network maintenance and recovery.
Impact on Customers
- Subsidies for Homelight Tariff Users: Retained to support low-income households.
- Disconnected or Meterless Users: Will not be required to pay.
- Municipalities: Data suggests most municipalities will benefit from the restructuring.
The restructuring aligns with Eskom’s unbundling plan, aiming to improve cost transparency and better reflect service delivery costs.
Challenges and Benefits
The last revision to Eskom’s tariff structure occurred in 2012, resulting in inefficiencies and mismatches in cost recovery. The new system seeks to address these issues while offering municipalities and consumers a fairer and more transparent pricing model.
Rantwane concluded, “Unbundling provides transparency and reflects a fair cost. According to our data, most municipalities are going to benefit.”
Eskom’s proposed tariff restructuring could mark a new chapter in South Africa’s electricity landscape, balancing cost recovery with fairness. While the changes promise benefits for municipalities and most customers, further clarity on implementation timelines and impacts is awaited.
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