SA electricity shake-up might plug billing gaps, but sparks will fly

Electricity Minister Kgosientsho Ramokgopa, ever alive to the public importance of resolving our electricity crises, has been very aware of the tariff crisis for some time. Almost immediately after load shedding ended he pointed out that there was no point having electricity if you could not pay for it.

At the same time the seemingly endless struggle persists between councils and Eskom on one side, and residents on the other, over the payment of bills.

Now Ramokgopa has published proposals that he says will make major changes.

In an interview on Newzroom Afrika this week he explained the bare bones of the proposed system.

First, and crucially, it will be much more transparent.

Instead of just receiving a bill from your local council that tells you how much power you used and when you used it, you will be told what made up the cost of the electricity you used.

He says this means your bill will show the cost of transmission, the cost of distribution and then a cost to administer all of this.

Presumably, the raw price of electricity – what your council pays Eskom for the power – would be included somewhere too.

Then he says there will be a new way to contain the losses through what are sometimes called “leakages”. This is about electricity that is simply not paid for or is lost for technical reasons.

As he explains it, currently, a council will know roughly how much power it loses. They then include an amount in their bill to you to make up for that.

In other words, you are absolutely paying for someone else to steal electricity, or you are paying because of the technical problems at the council.

In some cases those losses amount to 30% of the electricity the council is actually distributing.

This amount, this leakage amount, will now be capped.

So, while councils will still be able to charge you for some of this (presumably the system would simply not work otherwise – some leakage is inevitable), they will not be able to go above a certain limit.

Ramokgopa says this will be set according to international standards and presumably will be administered by the energy regulator Nersa.

He also says, slightly ominously for councils, that if they breach that cap, if they charge you more than they should for leakages, they will lose their licence to distribute.

That would probably mean that effectively Eskom would take over the provision of electricity in that area from the council.

All of these changes would affect primarily individuals living in dwellings across the country.

However, for the indigent and for business, other, perhaps even bigger shifts are coming.

The minister suggests that there will be a “concessional tariff framework” that will allow businesses to consume enough power to operate sustainably, in a way that won’t burden the consumer.

It could be intriguing to see how this will work.

Currently, the biggest individual consumers of power are smelters. Several of them are now running under concession agreements where they are paying less than you are for power.

This is surely being subsidised by Eskom, which means that in the end it is being subsidised by you.

Now this is supposed to change. The details are not entirely publicly clear at this moment, but presumably more details and analysis will emerge soon.

However, for the councils, who are billing mainly dwellings, these are huge changes by any measure – and are likely to lead to major disruptions.

As with any economic system that has been in place for a long time and become entrenched, so a whole economy has grown around it (think of the fuel price system and how so many filling stations have become shopping nodes based on the premise that the only way to make more money from selling petrol at a regulated price is to sell more of it).

In the case of power pricing, it is well known that before load shedding, and the huge increase in power prices since 2007, electricity tariffs subsidised much of their operations.

Now, this is all at risk.

If Ramokgopa is correct, that transparency will force pricing down, there will be consequences.

Imagine someone wants to build a factory near the Eastgate shopping centre in Joburg, right on the border between Ekurhuleni and Johannesburg. That person would know how much their electricity will cost them, down to the transmission and the distribution.

Some people in Bruma may decide to move just a kilometre across the border into Ekurhuleni just to take advantage of a lower transmission cost.

It would also lead to other, more interesting political consequences.

One can easily imagine a mayor in Cape Town pointing out to a mayor in Mangaung or Tshwane that their transmission costs are much lower and ascribing that to their greater competence.

But if councils are about to lose a large portion of the revenue to which they have become accustomed, what will happen?

More of them will require interventions from provincial or national government. Or perhaps a larger payment from the national equitable share from National Treasury.

It is also not clear whether the various entities that actually provide power in these councils will be able to cope with making the change.

Could City Power actually work out what the cost of distribution is? For each and every dwelling in Joburg?

It is also likely that there will be endless fights over the “leakage cap”. Councils know that without a very high cap they would be left much poorer. Residents would fight any attempt to keep it high, saying there is no reason to punish them when councils are not performing their jobs properly.

And these are not the only moving parts within the changes to our electricity system at the moment.

Last week, President Cyril Ramaphosa opened a massive new windfarm in Mpumalanga. Ramokgopa and Eskom’s top management were in China this week for an investment conference aimed primarily at getting us access to the equipment used to produce and transmit renewable power.

As Ramokgopa points out, as more renewable power comes on stream the aggregate cost of generation will come down, which will bring down power prices over the longer term.

All of this should mean that what you pay for power, say, five years from now will be much lower than it is now.

But there are many entrenched interests in this sector. Many of them, whether in councils or even the coal industry, have every reason to fight.

Which means any changes could still take some time to affect your final bill. DM