The next stage of Eskom's attack: Reducing cross subsidisation of electricity

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Nersa invited the public to comment on the proposed retail and restructuring plan earlier this month. Photo: Luvuyo Mehlwana
Nersa invited the public to comment on the proposed retail and restructuring plan earlier this month. Photo: Luvuyo Mehlwana


Eskom's proposed retail tariff restructure plan that s being considered by National Energy Regulator of SA (Nersa) is a threat to poor and low-income households, as it could potentially lead to soaring electricity and food prices.

This is according to a response submitted by the United Front Greater Johannesburg Region and the University of Johannesburg's (UJ) Centre for Sociological Research to Nersa's consultation process on Eskom’s proposed retail restructuring plan paper, which was concluded on October 8.  

Nersa invited the public to comment on the proposed retail and restructuring plan earlier this month. The energy regulator anticipates holding a public hearing and is currently consolidating the responses, said the regulator's spokesperson, Charles Hlebela.  

“Indeed, the threat of soaring electricity prices for poor and working-class people over the medium and longer term is potentially disastrous for South African household budgets. Once Eskom receives Nersa’s approval for 'removing of the inclining block rate tariff structure for homepower and homelight,' thus biasing the revised price of electricity towards the rich who consume more,” read the response.  

The inclined block tariffs (IBT) charge electricity according to blocks, wherein the first block is the cheapest at the beginning of the month. However, as consumption increases, the consumer progresses to the next block and is charged more. 

The objective of this inclining block tariff is to shield lower usage customers against high price increases, resulting in a reduction in tariff to these customers. This means that higher-consumption customers of electricity will incur punitive charges based on their usage.

The United Front and UJ's sociology department says the proposed move away from an IBT and price according to a single rate energy charge would mean that the richest who use more energy from the parastatal would have access to more power at a discounted rate. 

The two groups propose a more rapidly inclining block that would justify the increase in prices for the following reasons: 

  • Penalise using electricity irresponsibly; and

  • Excessive over-consumption by large corporates and rich South Africans. 

“Ultimately, Eskom’s policies have been ineffectual in squeezing desperately poor residents of townships for more money, notwithstanding Eskom’s unjust insistence that they pay bills rife with inaccuracies due to terribly weak billing administration.” 

The paper calls for free national basic electricity based on the fact that many municipalities do not have a higher volume of users to cross-subsidise the vast majority, the incapacity and inconsistent national supply and reversion of load-shedding.

"Many poor households have tenants or a larger number of children, hence, the cross-subsidy should be applied to households not in cookie-cutter mode but with a record of how many people reside in each, so as to increase the subsidy accordingly (a simple matter of adding a record to the database that contains the identification numbers of residents)."

The ANC’s failed promises yielded disaster  

According to the paper, the ANC’s political campaign of promising free water and electricity triggered anger from township communities, which resulted in them making illegal connections of electricity. 

“On the one hand, the ANC continued to win elections at the local level, in part thanks to free services promises for township residents, albeit with ever-lower majorities. Increasingly, the original free basic services policy mandate was distorted by subsequent ministers and bureaucrats.” 

 Instead of free electricity for all and water and services – the policy changed to providing free electricity and basic services in future years to “indigent residents defined in different ways”. 

“In a country whose unemployment and poverty have soared, especially since March 2020 when Covid-19 lockdowns began, and whose inequality levels were already the world’s worst, any moves towards 'cost-reflective' tariffs that hurt poor people who have residual free basic electricity subsidies and other cross-subsidies should be resisted.”  

Read the full commentary attached here: 

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