Introduction
In addition to the annual increases in Eskom rates, NERSA has approved a significant restructuring of Eskom’s tariff this year. The new Retail Tariff Plan (RTP), approved on 17 March 2025, aims to better align electricity tariffs with actual supply costs, improve transparency, and enhance fairness among consumers.
For energy-intensive users, particularly those integrating renewable energy solutions, these tariff adjustments have a material impact. This article summarises the key tariff changes, outlines their expected impacts, and offers two recommendations.
Key Changes in the Retail Tariff Plan
1. Adjustment of Time-of-Use (TOU) Periods and Changes
- The RTP proposes modifications to TOU periods, including extending the evening peak period from two to three hours and introducing a standard period on Sunday evenings.
- TOU charges are also revised significantly; notably, excluding the annual escalation approved by NERSA, the Standard tariff rates decrease by approximately 8%. These adjustments aim to better align tariffs with system demand patterns and the growing contribution from private photovoltaic generation, thereby providing more precise pricing signals to consumers.
2. Unbundling and Adjustment of Other Energy Charges
- A legacy charge is introduced, separating subsidy costs from early Renewable Energy Independent Power Producer Procurement Programme (REIPPP) rounds from the Wholesale Electricity Prices (WEPS). Alongside adjustments like removing the affordability subsidy credit for wheeling customers, this raises energy charges on wheeled energy by approximately R0.24/kWh, prior to accounting for distribution losses.
- Distribution loss rates for connections between >500 V and ≤66 kV increase from 9.6% to 15.6%, effectively increasing the cost of using the grid by about 6%.
3. Introduction of Generation Capacity Charge (GCC)
- The new GCC is implemented to recover costs associated with generation capacity. This new charge reduces reliance on volumetric energy charges, thereby stabilizing revenue recovery irrespective of fluctuations in consumption.
Impact on Renewable Energy Savings for Energy Intensive Users
For energy intensive users utilizing renewable energy solutions, including behind-the-meter generation or wheeling arrangements, the RTP restructuring carries significant implications:
Time-of-Use Adjustments
- Changes to TOU periods and tariffs notably reduce the relative savings from photovoltaic energy projects. Despite NERSA’s approved overall increase of 12.7%, RTP adjustments specifically result in approximately a 5% reduction in the value of PV-generated energy relative to WEPS (an 18% negative impact from TOU adjustments alone).
- Conversely, the relative value of wind-generated energy increases by approximately 9% (excluding the 12.7% escalation, the TOU adjustment impact on wind is approximately negative 3%). Wind energy aligns more favourably with peak pricing under new TOU periods and contributes substantially during off-peak periods, which are less impacted by the new TOU structure.
- This underscores the necessity of diversifying energy sources, particularly incorporating wind power and battery storage to complement PV generation.
Wheeling Arrangements
- The cost of wheeling energy (buying energy over the Eskom grid) will increase significantly, particularly those with connections between 500 V and 66 kV —from R0.31/kWh in 2024-2025 to R0.63/kWh in 2025-2026. If increases were solely driven by the approved 12.7% escalation, charges would have been approximately R0.34/kWh.
- Grid charges increasingly reflect Eskom’s role as the generator of last resort and growing grid congestion. Energy intensive users capable of generating electricity behind-the-meter, particularly when paired with onsite storage, can enhance overall grid resilience, improve reliability of supply, and optimize energy cost efficiency compared to both Eskom tariffs and wheeled energy from private sources.
Recommendations
- Although Eskom’s RTP aims for a fairer and more transparent tariff structure, energy-intensive users will face significant changes in electricity costs and renewable energy project savings. It is recommended that companies reassess their energy costs using the new tariff structures.
- Energy market dynamics in South Africa will increasingly reflect global trends over the next five years, characterized by rapid growth in photovoltaic penetration, declining midday energy prices, widespread adoption of battery storage, and increased value for off-peak generation. Given this context, tariff structures are expected to evolve further. Energy-intensive users should strategically plan their energy procurement, considering both immediate tariff implications and the long-term viability of current and planned renewable investments.
Conclusion
Renewable energy remains economically attractive compared to conventional Eskom tariffs; however, the Retail Tariff Plan sends a clear signal about the future direction of the energy market. Electricity procurement strategies are becoming increasingly sophisticated, requiring energy-intensive users to adopt strategic planning, informed by tariffs and evolving market conditions, to remain cost competitive.
