Electricity for all: options for a basic electricity support tariff

11 May 2002
PLANS are underway for the Executive Director of Eskom, Jacob Maroga, to present a copy of a far reaching report to the Minister of Minerals and Energy, Phumzile Mlambo-Ngcuka.

The 206-page report, Options for a Basic Electricity Support Tariff: Analysis, Issues and Recommendations, investigates mechanisms for supplying electricity to the nation's poorest and examines the various social, economic, health and environmental impacts on the country. The project was a joint initiative between UCT, Eskom, and the Department of Minerals and Energy, and involved 12 of the University's top researchers in three Faculties.

The report is the result of an intensive research project carried out between October 2001 and February 2002. "The Government has committed itself to supporting from 2002 a tariff under which electricity will be supplied to poor households. Our research was carried out into the purpose, costs, benefits and processes of implementing the tariff," said Professor Trevor Gaunt of the Department of Electrical Engineering and the principal researcher of the project. "This report describes these findings and makes recommendations for a Basic Electricity Support Tariff (BEST), which is what we proposed the tariff be called."

However, any solutions to provide subsidised network power to the poor will still be dependent on access to the network. "It is very clear from projections of continued electrification that in 2010 there will be many poor households still without access to electricity," Gaunt added.

In terms of the subsidy required, a supply of basic electricity to meet the needs for lighting, media access and limited cooking would require about 35 to 60 kWh on per month and would be worth about R200 a year to a poor household. "It was estimated that this could result in a revenue loss to the electricity distribution industry of about R630 million annually in 2001, rising with increased electrification, to about R15-billion in present value terms," he explained.

A two-block increasing rate energy tariff offering free or cheap power in the first block seems to be the most technically feasible of the options for a subsidised tariff, the report indicates. The report also investigated the suitability of tariff schemes using prepayment meters. Charles Dingley, also of the Department of Electrical Engineering, added that while certain changes would be necessary in order to implement a subsidised tariff structure, particularly to old proprietary meters, the total cost of changes to vending systems (for all meters) was not expected to exceed R40-milion.

Other important factors considered in the report include the health and environmental impact of electricity in poor homes. Professor Neil White of the Department of Medicine explained: "Indoor air pollution, for example, resulting from combustion fuels is a huge factor in respiratory disease. The reduction in annual costs of treating lower respiratory infections would be about R70-million under the scenarios tested."

The report highlights several important considerations arising from the social investigations, which were led by Professor Gisela Prasad, of the Energy and Development Research Centre. These include the need for free or subsidised electricity for the very poor to benefit from access to electricity, and the strong perceptions of inequity between those with and without electricity. It also cites a lack of electrical appliances in most poor households as a factor that could limit their capacity to enjoy subsidised power.

Regarding the economic impact of a subsidised electricity tariff, the researchers found that a subsidised supply of 50 kWh/household would have a "relatively small" impact on the entire economy, on growth, investment and redistribution of wealth.

In a nutshell the report's seven key recommendations were that:
  • the National Electrification Programme continues to connect more households to the network;
  • the Government extend a support tariff to assist the poor households connected to the network;
  • the tariff be given a suitable name: the Basic Electricity Support Tariff (BEST);
  • the tariff be implemented on a national basis, without allowing "freedom of choice" by electricity supply utilities;
  • the tariff should not be one that provides free electricity because of future problems.
However, the first block of "basic" energy would be provided at a heavily subsidised rate:
  • the first block of energy of 50 kWh should be provided at R5 in 2002;
  • a policy be investigated to enable poor households disconnected for outstanding electricity debt to be reconnected under specified conditions.
A self-targeted tariff restricting customers to a maximum current of about 8A appears to be the most favourable tariff for implementing a basic electricity subsidy.

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