The Organisation Undoing Tax Abuse (Outa) has released an alternative to Eskom’s proposed retail tariff plan (RTP) ahead of public hearings into the plan, which proposes far-reaching changes to the residential tariff structure that some warn could penalise households with rooftop solar.

The National Energy Regulator of South Africa (Nersa) will host virtual hearings into Eskom’s proposed RTP on January 23, having postponed the hearings from the initial December 18 date set.

The postponement was announced after national hearings on Eskom’s sixth multiyear price determination (MYPD6) ran longer than anticipated, but also came amid concerns that the December 17 deadline for written comments and the December 18 date for hearings coincided with South Africa’s summer holiday period and that stakeholder input could, thus, be muted.

In December, Nersa extended the deadline for written comments to January 17, and it has since confirmed that nine oral presentations have been scheduled for the January 23 hearings, including one by Eskom itself.

Eskom has been seeking changes to the RTP for several years, arguing that the structure is no longer appropriate in light of changes that have taken place in the electricity distribution industry, including the unbundling under way.

It has made the case for a splitting of the energy charges into variable time-of-use volume charges and a fixed generation capacity charge and for an increase in the distribution fixed charge network charges component weighting, with a commensurate reduction of the variable charge.

Eskom has described the changes as urgent and expects the new structure to be implemented from April 1, together with the MYPD6 tariff adjustments that Nersa is currently adjudicating. Eskom has requested increases of 36.15%, 11.81% and 9.1% for the coming three years and Nersa is expected to make its final determination known before the end of January.

In its submission, Outa acknowledged that electricity tariffs to electricity distributors are outdated and structurally inappropriate for both Eskom and non-Eskom electricity distributors and calls for an independent review of both the structure and electricity tariff rates.

It is also supportive of the proposed elimination of the inclined-block tariffs, which it describes as punitive.

However, it objects to several of the changes outlined in Eskom’s RTP, including mandatory time-of-use tariffs for households with solar, as well as what it describes as a shifting of the risks to customers with bigger fixed charges.

“We oppose any changes that place an unfair burden on consumers or discourage energy efficiency and small-scale embedded generation, like rooftop solar,” Outa states.

Instead, Outa is recommending that the following changes be considered by Nersa, including:

• a rejection of mandatory time-of-use tariffs for customers with small-scale embedded generation, which it describes as discriminatory;
• a flat-rate tariff on energy for prepaid residential customers;
• a two-part tariff option with a fixed monthly component and a flat-rate energy component (without time-of-use) for residential postpaid customers, as well as a two-part tariff option with a fixed monthly component and separate import/export time-of-use energy components for residential postpaid customers;
• a three-part tariff with a fixed monthly component, separate import/export time-of-use energy components, and a maximum demand component, for commercial, agricultural and smaller industrial customers; and
• a four-part tariff with a fixed monthly component, separate import/export time-of-use energy components, a reactive energy component and a notified maximum demand component, for large industrial or mining customers.

Outa also calls on Nersa to conduct a study on global best-practice in respect of the ratio between fixed and variable components of electricity tariffs, while stressing that it opposes any sudden changes to the prevailing ratios.