Pretoria: The South African government has announced a comprehensive plan to revamp the country's electricity pricing policy, aiming to reduce high electricity costs while maintaining cost-reflective tariffs. The new measures also seek to protect vulnerable households and key economic sectors. The strategy is outlined in the Revised Electricity Pricing Policy, which was approved by the Cabinet for public commentary last month.
According to South African Government News Agency, the updated policy revises the 2008 Electricity Pricing Policy to incorporate recent developments within the electricity supply industry. This includes ongoing market reforms related to the unbundling of Eskom and the anticipated implementation of the Electricity Regulation Amendment Act, 2024. The policy aims to establish national principles and tariff-path certainty, offering a transparent framework for cost-efficient tariffs. This will guide the National Energy Regulator of South Africa (NERSA), Eskom, and municipalities, aligning electricity prices with a competitive market while strengthening social protection and accountability.
Minister of Electricity, Kgosientsho Ramokgopa, highlighted that electricity tariffs have surged by approximately 977% since 2007, prompting the introduction of these proposals. The revised policy seeks to establish a tariff path that provides certainty on electricity costs over the next decade, which is crucial for heavy industries planning significant investments in South Africa.
As part of the policy, NERSA will be mandated to publish a 10-year price forecast. This forecast is pivotal for industries reliant on electricity, allowing them to compute their return on investment by understanding future electricity costs. The policy also aims to eliminate hidden costs in electricity tariffs by enforcing transparent and efficient cost-reflective tariffs.
To foster competition, the government plans to liberalize the electricity market, reducing Eskom's monopoly by introducing new generators and allowing bilateral agreements between electricity generators and off-takers. This move is part of broader sector reforms, as South Africa transitions towards a wholesale electricity market.
The new policy also emphasizes social protection, ensuring support for poor and vulnerable communities. Ramokgopa explained that the current tariff structure, which allows Eskom to recover municipal debts through tariffs, adds pressure on diligent consumers. The revised policy will prevent this practice and enable action against non-paying consumers and illegal grid connections.
Moreover, the government intends to modernize the administration of free basic electricity for indigent households by establishing a central database. This database will integrate with existing records from Home Affairs and social grant databases to efficiently identify eligible households.
To support energy-intensive industries, the policy introduces a Negotiated Pricing Agreement instrument. This tool will not only assist distressed industries but also support those capable of contributing to national economic growth and employment, thereby rejuvenating the South African economy.