More free electricity, but who will pay for it?

As the government considers increasing the amount of Free Basic Electricity (FBE) to give to indigent households, the Organisation Undoing Tax Abuse (Outa) warns that simply increasing the allocation could deepen pressure on already struggling municipalities and paying electricity customers, particularly if government fails to fix the system that determines who qualifies and how the benefit is funded.

Minister of Electricity and Energy Dr Kgosientsho Ramokgopa announced that government will increase the FBE allocation for indigent households from 50kWh to between 200kWh and 300kWh.

Julius Kleynhans, executive manager for local government at Outa, told The Citizen the initiative is supported because electricity is no longer a luxury but has become fundamental to cooking, lighting, education, communication and participation in the economy. Despite this support, he added that the government still has to work on how it executes the policy.

Free electricity won’t solve the problem

The 50kWh allocation was set more than two decades ago, and electricity consumption has since increased significantly, a point the minister acknowledged. According to Kleynhans, Dr Tracy Ledger from the Public Affairs Research Institute (Pari) did interesting work on the topic and has lobbied for around 350kWh per month, making a strong case that this shift is necessary.

While Kleynhans believes increasing allocation will make a difference for indigent households, he also believes it will not solve the problem, adding that there also needs to be a clear indication of who will pay more for the increased allocation. Municipalities? Already struggling customers?

“However, we should be careful not to think that simply increasing the number of free units solves the problem. The bigger issue is whether the benefit actually reaches the people it is intended for.

“There also needs to be clarity about who ultimately pays for an increased allocation. If the government increases FBE but does not adequately fund it, the burden shifts to municipalities, electricity distributors, or other paying customers through higher tariffs. That would be counterproductive.”

Challenge with free electricity policy

The government has previously been criticised for how it has implemented the policy, with some saying that a significant number of households are not benefiting from FBE. Kleynhans believes this is still the issue.

“The policy intention is good, but implementation has been poor and inconsistent across municipalities. Government itself has previously acknowledged that millions of households who should benefit from FBE are not receiving it.

“The Auditor-General has also repeatedly highlighted that nearly half of our municipalities did not have adequate internal controls to manage indigent households.”

Simply put, the amount of free units households receive is not the only issue; the biggest challenge lies in identification, registration, administration, outdated indigent registers and municipal capacity.

How to get free electricity

According to Eskom, indigent households must prove to their municipalities that they cannot pay for electricity and water. Individuals must visit their municipalities to apply for free electricity, or dial *130*869# or *130*269#.

“Municipalities determine who qualifies to receive the 50kWh per month of free basic electricity using the qualifying criteria outlined in their respective indigent policies,” said the power utility.

Criteria include a total monthly household income below a set local threshold (often around R3 500 to R7 531 depending on the municipality) or being a recipient of a Sassa social grant.

According to Eskom, 50kWh can power four lightbulbs for four hours, a TV for three hours, an iron for 10 minutes, a fridge for 20 minutes, and charge a cellphone for 24 hours.

More pressure on municipalities

Kleynhans warned that increasing free units might devastate already cash-strapped municipalities; therefore, “the intervention must be properly funded and targeted”.

“Many municipalities are already in serious financial distress. They face serious consumer debt, poor collection rates, infrastructure backlogs and growing bulk electricity accounts. We cannot introduce another unfunded or inadequately funded mandate and expect municipalities to absorb it.

“There is also a danger that paying customers increasingly carry the cost through cross-subsidisation. Electricity tariffs are already becoming unaffordable for many ordinary working households who may not qualify as indigent but are themselves under considerable financial pressure.”

He noted that it is important to maintain infrastructure, tap into alternative energy resources, and reduce electricity costs instead of increasing them annually due to inefficiencies.

Policy needs to be worked on

Kleynhans believes the government still has to work on policy, not simply increase the amount of free units to indigent households.

“We need a credible national framework for identifying qualifying households, much better integration of data between municipalities and national government, accurate and regularly updated indigent registers, Equitable Share grants need also to be conditional to ensure it is used for its intended purposes, and a much simpler process for poor households to access the benefit is crucial.

“Government should also consider whether the current system of requiring vulnerable households to repeatedly register or prove indigent status is unnecessarily excluding people who clearly qualify.”

He said the objective should be to ensure that the right amount of support reaches the correct households, while protecting the financial sustainability of municipalities and the electricity system.

“South Africa needs affordable electricity, but affordability cannot be achieved by simply shifting costs from one struggling group of consumers to another.”