KwaDukuza Municipality considers tariffs for independent power producers

KwaDukuza residents who produce their own electricity may soon face operational tariffs, while large scale independent power producers are currently blocked by the municipality.

This was revealed as part of KwaDukuza Municipality’s (KDM) draft energy policy which was presented to council last month.

The news of the proposed tariffs has been widely shared, with many residents who invested in alternative energy solutions feeling as if they are being unfairly targeted for being pragmatic.

Under the policy, small and medium scale embedded generators (SSEGs and MSEGs) would be liable for a fixed charge imposed for use of the municipal network, and an unclear ‘energy use charge’ dependent on power consumed.

Embedded generators are those that connect their energy source to the municipal grid.

SSEGs would also bear the cost of municipal meter installation, application fees, connection charges (if applicable), specialist tests and impact studies, among others.

The municipality strongly denies the energy policy is motivated by revenue enhancement, however.

“The main purpose of the policy is to promote safety which is linked to embedded generator installations in and around the municipality. The municipality seeks to get an inventory of such installations and to have these installations registered formally should they not have undergone a formal application process,” said KDM spokesperson, Sipho Mkhize.

Per the draft policy however, the municipality admits that alternative energy installations would lead to a decrease in revenue.

“KwaDukuza faces a gradual loss of consumers due to households and businesses opting to go off-grid. If too many customers defect, the municipal distribution may experience declining revenue and the municipality would be without means to cross-subsidise other critical services, including free basic electricity provision and other utility services, and relook at how other levies are administered,” reads the policy.

KDM also seeks to cut out the ‘wheeling’ of electricity, which is when an independent generator uses the municipal grid to transfer self-generated electricity to another user and charges them.

The draft energy policy was opposed by ActionSA and the Independent Alliance when it was presented to council.

There are some benefits attached to the policy however, including a potential tariff rebate if certain criteria are met, and an unclear ‘feed-in rate’ where energy producers would be compensated for power fed back into the grid.

If very specific criteria are met on the installation of solar panels, the user could claim a rebate up to 25% of the installation cost, capped at R15 000 per individual installation.

More detail is needed on the feed-in rate, which could see residents recovering some of their ongoing costs when excess power is fed into the grid.

This matches policies in many countries worldwide where individual energy production is incentivised, but it is currently unclear what the specific parameters are.

The municipality did not respond to the Courier’s further requests for clarity.

As for longer term solutions with large scale independent power producers (IPPs), KDM’s position is currently a blanket denial.

Despite acknowledging the fact that power purchased from IPPs is currently cheaper than that from Eskom, KDM will not consider IPP applications until a holistic energy policy has been introduced.

Whether this policy will be in time to solve KDM’s ongoing energy crisis, where hundreds of millions of rands worth of power are lost annually, remains to be seen.

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