The National Energy Regulator of South Africa (NERSA) has approved Eskom’s request to change its electricity tariffs for the 2025/26 financial year. The utility proposed a restructure in November last year to “better reflect” the costs of generation, transmission and distribution across customer segments.

The decision, taken at NERSA’s meeting on February 18, will see significant changes to Eskom’s pricing model with the aim of making tariffs “more transparent, equitable and cost-reflective”, says Nomfundo Maseti, Acting Regulator Member for Electricity Regulation.

The approved plan introduces key structural adjustments to Eskom’s Schedule of Standard Prices, including:

Unbundling energy charges

NERSA has also approved the unbundling of energy charges. The fixed Generation Capacity Charge (GCC) will be phased in gradually, starting at 20% of its proposed level in year one and increasing to 30% in years two and three. A separate legacy charge will also be introduced to cover costs from independent power producer (IPP) contracts. “The allocation towards the proposed GCC has been reduced to 20% of its proposed level in year one to protect customers from significant price increases,” says Maseti.

Municipal tariff rationalisation

Municipal tariffs will be consolidated into three categories: Municflex (LPU) for large power users, MunicRate (SPU) for small power users, and Public Lighting for non-metered lighting services. “The rationalisation of municipal tariffs into three categories will reduce complexity and aid in better forecasting, which will result in some municipal customers experiencing lower average monthly bills,” says Maseti.

Time-of-Use (TOU) charges

NERSA approved adjustments to Time-of-Use (TOU) periods and rates to “better align with system demand and customer needs”. The morning peak demand will be reduced, while the evening peak will increase. During the high season, the morning peak will be from 06:00 to 08:00 and the evening peak from 17:00 to 20:00. In the low season, the morning peak will be from 07:00 to 09:00, with the evening peak running from 18:00 to 21:00. The peak-to-standard ratio will shift from 1:8 to 1:6 and standard hours will be introduced on Sunday evenings from 17:00 to 19:00.

Residential tariffs

For residential users, Eskom will introduce cost-reflective tariffs for Homepower and Homeflex, with a phased-in fixed service charge over three years. Additionally, the Inclining Block Tariff (IBT) structure for Homepower and Homelight tariffs will be removed. Maseti explains that the removal of IBT tariffs “simplifies the pricing model and will have a positive impact on low-consuming customers”.

Network and service charges

Network charges will now be split into fixed and variable components to “better reflect cost structures”. Additionally, service charges will be based on the number of Points of Delivery (PODs) instead of accounts, ensuring fairness and better cost allocation, Maseti says.

The affordability subsidy credit for customers wheeling energy will be removed to ensure all users contribute fairly to inter-tariff subsidies. Meanwhile, transmission loss factors for generators will be amended to reflect the current network configuration, addressing instances where Eskom was previously paying generators in certain transmission zones, Maseti says.

“The decision has considered the concerns raised by stakeholders regarding the rationalisation of tariffs and fixed charges. In this regard, the fixed component of the service charge will be phased in over three years. The allocation towards the proposed Generation Capacity Charge (GCC) was reduced to 20% of its proposed level in year 1 to protect customers from significant price increases. Furthermore, the rationalisation of municipal tariffs into three categories will reduce complexity and aid in better forecasting, which will result in some municipal customers experiencing lower average monthly bills,” Maseti says.