The draft Review of Electricity Pricing Policy (EPP), which has been published for public comment, seeks to provide guidelines to the National Energy Regulator of South Africa (Nersa) for a standardised, non-discriminatory approach to electricity pricing in a context of an electricity supply industry “rapidly transitioning” away from its monopoly structure to one that is market based.

The document, the release of which was approved by Cabinet last week, was Gazetted by Mineral Resources and Energy Minister Gwede Mantashe on February 10, with a 30-day comment period.

It has been published against the backdrop of a steep increase in electricity prices over the past 15 years, as well as the prospect of yet another double-digit hike from April, raising serious affordability concerns for households and businesses alike.

After approving its release, Cabinet said the revised EPP sought to strike a balance between providing affordable electricity tariffs for low-income consumers and a cost-reflective electricity tariff for all other consumers.

The theme of cost-reflectivity is, in fact, emphasised throughout the 124-page document, which states that tariffs should become cost-reflective in five years from adoption, even though the three-year timeframe outlined in the original EPP of 2008 was not met.

“All tariffs should become cost-reflective over the next five years, except for specific cross subsidies as provided for,” the review states.

The cross subsidies should address certain socioeconomic and environmental needs and the draft EPP proposes that the Department of Minerals Resource and Energy (DMRE), together with Nersa, finalise a national subsidy framework to guide the application of such subsidies and to ensure transparency.

The document also offer a detailed exposition of the difference between energy, capacity and ancillary service charge and how this should be applied.

It also makes the case for the implementation of time of use tariffs and states that “net-energy billing” should be allowed, subject to any licensing or registration required by law and in compliance with Nersa rules.

Also included is a position stating that Nersa “shall provide a framework to guide the standardisation of existing electricity distributors’ tariff structures”.

The EPP was Gazetted simultaneously with the Electricity Regulation Amendment Bill, which provides for a shift to a competitive multimarket electricity supply industry.

The Bill also caters for the establishment of a Transmission System Operator (TSO), which will be responsible for operation and expansion of the physical transmission network, as well as that of the role of system and market operator.

The preamble to the Bill states that the proposed legislation seeks to establish a national regulatory framework for the electricity supply industry, make Nersa the custodian and enforcer of that regulatory framework and to cater for the establishment of the TSO, to provide a competitive multimarket structure.

As is the case with the EPP, interested and affected parties have 30 days to submit written comments to the DMRE.