Electricity Pricing Policy: At What Cost?

Statement by Kevin Mileham MP – DA Spokesperson on Electricity and Energy:

The revised Electricity Pricing Policy (EPP) that was gazetted today marks a major shift in how South Africa regulates electricity pricing.

The Democratic Alliance has called for a new EPP for years because the 2008 framework was designed for an electricity system dominated by an Eskom monopoly, with limited private generation, wheeling and competition.

The revised policy recognises that the electricity market has changed, with private generation, embedded generation, electricity traders, wheeling and greater network access becoming increasingly important.

There are important principles in the policy that the DA supports.

The move towards cost-of-supply regulation is sensible. Utilities should recover efficient and prudent costs, rather than simply passing every expense on to consumers. Stronger regulatory accounting, ring-fencing and investment-prudency requirements should help prevent waste, theft, bad debt and unrelated municipal expenditure from being hidden in electricity tariffs.

The DA also supports wheeling and open network access. Consumers who purchase electricity from alternative suppliers should pay a fair cost for using the network, rather than being penalised for choosing a different source of electricity.
However, the central concern is affordability.

Consumers could still face high electricity costs even when they use less electricity, install solar or improve energy efficiency.

Customers who use the electricity grid should pay a fair share of the cost of maintaining it. However, charges on rooftop solar and other private generation must reflect the real costs and actual use of the grid. They should not be used to penalise consumers for generating their own electricity.

The DA is also concerned about legacy costs and negotiated pricing agreements. Consumers should not indefinitely carry the costs of historical inefficiencies, poor decisions or failed contracts. Any legacy recovery charge must be transparent, independently justified and subject to a clear expiry date. Similarly, households and small businesses must not become the hidden funders of preferential electricity pricing for large users.

The expanded responsibilities placed on NERSA also require scrutiny. The regulator must have the technical capacity, resources, data and independence to distinguish legitimate and efficient costs from inefficiency.

The DA will use the public-comment process to call for a full affordability and bill-impact assessment, strict safeguards around fixed and capacity charges, stronger protection for prosumers, transparent and time-limited legacy costs and negotiated pricing agreements, and an independent assessment of NERSA’s capacity to implement the policy.

The DA supports the move towards greater competition, transparency and cost discipline in the electricity sector.

But consumers cannot be the shock absorber for every unresolved problem in the electricity system.

Before this policy is implemented, government must answer one simple question: What will it do to the electricity bill of an ordinary South African household?