The National Energy Regulator of South Africa (Nersa) offered the first practical glimpse on Wednesday of what the long-awaited "residential inclining block rate tariff structure" would mean, when approving tariff hikes for Eskom under the so-called second Multiyear Price Determination Period (MYPD2).
The tariff structure, which is viewed as a key tool in providing a cross-subsidy for low-income domestic consumers and which is also a requirement of the relatively new Electricity Pricing Policy, would be implemented during the period from April 1, 2010, through to March 31, 2013.
In 2010/11, the new mechanism will translate, owing mainly to implementation issues, into a 10,59% reduction in the tariff, to 54,7c/kWh, for households consuming less than 50 kWhs of power monthly, and a reduction of 5,2%, to 58,48c/kWh, for those consuming between 51 kWhs and 350 kWhs monthly.
The tariff would increase by 5,4% and 5,5% in the 2011/12 and 2012/13 years respectively (rising eventually to 60,83c/kWh) for those in the sub-50-kWh band, and by 13,23% and 13,5% respectively for those consuming between 51 kWhs and 350 kWhs, with the price rising to 75,09c/kWh by the end of the MYPD2 period.
By contrast, households consuming between 351 kWhs and 600 kWhs monthly will face immediate increases of 21,95%, raising the price to 72,35c/kWh in 2010/11, with subsequent yearly increases of 25,8% and 25,9% planned, which would raise the price to 120c/kWh in 2012/13.
Those households consuming more than 601 kWhs monthly would face relatively punitive tariff increases of 35,82% to 83,74c/kWh in 2010/11, followed by increases of 25,8% and 25,9% in 2011/12 and 2012/13, which would raise the price to 132c/kWh by the end of the MYPD2 period.
Nersa calculates that the average residential tariff across all four blocks would be 60,6c/kWh in 2010/11, rising to 68,83c/kWh next year, and to 78,62c/kWh by 2012/13.
Nersa's Thembani Bukula said that the block tariffs would be carried over to the block tariffs of the municipalities, which distribute power, mostly generated by Eskom, to the majority of residential consumers in South Africa.
Earthlife Africa, which has been a strong advocate of block tariffs, welcomed Nersa's decision "to implement a rising residential step block tariff".
However, it implored the regulator to revise the 50 kWh of free basic electricity allowance and to consider increasing it to 200 kWhs per household a month.
"There needs to be mechanisms to safeguard the millions of poor people in SA from these tariff increases," it said, noting that Nersa had approved increases of 24,8% in 2010/2011, 25,8% in 2011/2012 and an increase of 25,4% in 2012/2013.