Electricity and Energy Minister Kgosientsho Ramokgopa speaks during the unveiling of the Revised Electricity Pricing Policy, which proposes changes to how electricity tariffs are structured and regulated.
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South African households could face a major shift in how electricity prices are structured as government moves to overhaul the country’s electricity pricing system, with the proposed changes placing affordability and the treatment of low-income consumers at the centre of the debate.
Electricity and Energy Minister Kgosientsho Ramokgopa unveiled the Revised Electricity Pricing Policy on Tuesday, August 18, after Cabinet approved its publication for public comment in July. The policy updates the 2008 framework and proposes changes to how electricity tariffs are structured and regulated.
The proposals include separating electricity costs across generation, transmission, distribution and retail, while strengthening regulation of prices, tariffs and charges.
Government says the changes are intended to improve transparency and ensure consumers are not unfairly burdened by costs arising from inefficiencies in the electricity system.
Ramokgopa said electricity prices had increased by more than 900% since 2007, while inflation had risen by about 150% over the same period.
"It is important that we address the cost of electricity," Ramokgopa said when outlining the proposed reforms.
The policy also proposes changes to support vulnerable households, including an increase in the amount of free basic electricity available to qualifying indigent households.
Energy analyst Chris Yelland has questioned how the expanded benefit would be funded and whether greater tariff transparency would necessarily result in lower prices for consumers.
Yelland said separating the components of electricity tariffs would provide greater clarity, but would not by itself reduce the overall cost.
The question, he said, was whether the proposed reforms would change the underlying cost of electricity.
Energy expert Professor Vally Padayachee has offered a more positive assessment of the proposed changes.
Padayachee said inefficiencies in the electricity system had historically been reflected in the prices paid by end users.
"If you look at your technical losses and non-technical losses, all of them talk to inefficiencies within Eskom and the municipalities, and that traditionally got translated in some manner to the end-use customer," Padayachee said.
He said the proposals could eventually contribute to lower electricity prices if implemented.
"If you look at the proposals under this policy as a collective, if this policy materialises, then prices should come down," Padayachee said.
The proposed policy would also introduce greater visibility over future electricity costs, with the National Energy Regulator of South Africa expected to publish a rolling 10-year electricity price forecast.
Government says this would give consumers, businesses and investors greater certainty when planning for future electricity costs.
Another proposed change is the treatment of costs associated with electricity losses and unpaid municipal debt.
Ramokgopa said consumers who pay their electricity bills should not carry the cost of customers who do not pay.
"If you look at the current tariff, anything between 1% to 2.5% of the tariff that you are paying is on the basis that Eskom is unable to recover what the people are owing," he said.
"In terms of this policy, that’s not allowed."
The proposed reforms come as municipalities and electricity distributors continue to grapple with financial pressures, electricity losses and unpaid debt.
Cabinet said the revised policy is also intended to consolidate the regulatory framework across the electricity value chain and align pricing with changes taking place in the electricity market, including the unbundling of Eskom and implementation of the Electricity Regulation Amendment Act.
The policy remains a proposal at this stage and has been published for public comment. Cabinet said the revised framework is intended to strengthen tariff transparency while supporting affordability and protecting vulnerable electricity users.
