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Kelvin Kemm - COMMENTARY ON THE REVISED ELECTRICITY PRICING POLICY
The Freedom Foundation & Izwe Lami is a policy think tank which researches and analyses government policy and positions in the national interest. It has no political affiliations or allegiances.
The energy sector is perhaps the most critical South African sector as it supports and affects every individual’s life and determines the economic prospects of the country for than any other single factor.
We have brought together several experts who provide valuable insight to energy market transformation in addition to making our internal submission from CEO Leon Louw.
The comments and thoughts below are from Dr Kelvin Kemm*, one of our expert associates, who makes a valuable contribution in his own right while being aligned with our organisation and approach. * A short biography is at the end of the document.
TABLE OF CONTENTS
1. Background and Context
1.1. Electricity price to the consumer
1.2. The Municipality consideration
2. Summary
3. Specific Aspects of the EPP
3.1. Revenue requirement, asset valuation and investment prudency
3.2. Policy Position 2: Cost-reflective tariffs
3.3. Transparency and unbundling on customer bills
3.4. Non-discrimination
3.5. Access to and use of networks/wheeling
3.6. Special products and tariffs
3.7. Long-term price outlook
3.8. Scope of generator pricing policy
3.9. Generator tariff structures
3.10. Generator price levels and power purchase agreements4. Positive Features
3.11. Wholesale time-of-use and capacity/standby charges
3.12. Central Purchasing Agency and legacy PPAs
3.13. Wholesale energy tariff and over/under recovery
3.14. Ancillary services and related charges
3.15. Generation standby charges
3.16. Allocation of transmission costs between generators and customers
3.17. Transmission tariff levels
3.18. Transmission investment, refurbishment and maintenance
3.19. Geographic and generator-related transmission pricing
3.20. Transmission cost allocation and changing generation mix
3.21. Transmission charges for international transactions
3.22. Cross-border sales and purchases
3.23. Distribution pricing principles
3.24. Distribution cost reflectivity and tariff design
3.25. Cost-of-supply and cost-to-serve studies
3.26. Customer categories
3.27. Tariff structures and fixed/demand charges
3.28. Rationalising electricity tariff structures
3.29. Time-of-use tariffs and tariff options
3.30. Distribution use-of-system charges and wheeling
3.31. Wheeling and treatment of energy supplied by third parties
3.32. Retail charges
3.33. Net billing and embedded generation exports
3.34. Wheeling credits, billing and settlement
3.35. Demand-side flexibility and demand response
3.36. Time-of-use and other energy charges
3.37. Voltage, location and network cost differences
3.38. Tariffs that do not reflect cost causation
3.39. Connection charges and customer-funded assets
3.40. Public lighting
3.41. Refurbishment and maintenance of distribution networks
3.42. Distribution losses and bad debt
3.43. Measurement and treatment of technical/non-technical losses
3.44. Reseller charges and consumer protection
3.45. Electricity vending services
3.46. Tariffs for organs of state
3.47. Municipal Surcharge on Electricity (MSOE)
3.48. Demand- and supply-side flexibility funding
3.49. Utility-owned embedded generation
3.50. National subsidy framework
3.51. Lifeline tariff for qualifying customers
3.52. Free Basic Electricity
3.53. Free Basic Alternative Energy
3.54. Negotiated Pricing Agreements (NPAs)
5. Concerns Regarding Freedom, Competition and Constitutional Principles
5.1. Regulatory discretion and accountability
5.2. Consumer choice and market entry
5.3. Market distortion and generation-cost claims
5.4. Embedded generation, standby supply and safety
5.5. Municipal revenue and fiscal transparency
5.6. Industrial tariffs, regional development and subsidies
5.7. Legal certainty and constitutional principles
5.8. Cost recovery must be matched by efficiency and accountability
5.9. Independent local supply and freedom to choose network arrangements
5.10. International lessons on pricing and market participation
5.11. Independent local grids, microgrids and industrial supply
6. Conclusions and Recommendations
Appendix A: Key principles for implementation
Appendix B: Selected supporting references
1. Background and Context
The Freedom Foundation submits these comments on the Revised Electricity Pricing Policy (EPP) 2026 published by the Department of Electricity and Energy in Government Gazette 55257 on 28 August 2026. The Freedom Foundation has, as its central concern, whether the Policy will help South Africans obtain reliable electricity at a price that supports individual choice, productive enterprise, investment, employment and economic growth.
The country needs electricity because Electricity Consumption is directly linked to GDP. There are no exceptions to this reality.
In South Africa, the electricity price has gone up over the last number of years, due to political factors, and also due to mismanagement in Eskom and elsewhere. This price rise damages the economy.
The consumption of energy, in any country, is directly related to the GDP. There are no exceptions anywhere in the world. It is therefore important to try to increase the consumption of energy and, for the purposes of this commentary, the consumption of electricity.
An increased electricity consumption implies increased economic activity, which in turn is beneficial to all citizens of the country. As far as individuals are concerned, an increased electricity consumption implies that they are living a better quality of life, with better home lighting, cooking, washing, and such. Therefore, contrary to the mantra projected by some groups: ‘Reduce electricity consumption,’ quite the opposite is true. There should be a call to increase electricity consumption dramatically. However, this means increasing electricity consumption in a productive economic manner, not in a wasteful manner. It is undoubtedly advantageous to develop more energy-efficient devices and more energy-efficient systems in general, but it is not in the interests of the population for the electricity consumption of either themselves or of the country to decrease.
Another reason why electricity prices have been going up is the swing to Renewable Energy, which has been significantly brought about due to European fears of climate change. This is another political intrusion into the economics and engineering of electricity supply.
Unfortunately, their influential opinion projected that renewable energy is cheaper than conventional coal and nuclear. This is completely untrue.
Unfortunately, the proponents of renewable energy use significant political manipulation, via European governments and NGOs, to paint a false picture of renewable energy being so efficient and inexpensive.
The bottom line is that the prices of renewable energy, as quoted to the public, are just not true. We have to be realistic about real pricing, otherwise, the electricity price will not come down and will continue to rise, as has been clearly illustrated in Germany, which has implemented disastrous energy policies.
Electricity consumption will increase if there is an increased supply provided, and if the price to the consumers is kept low. To achieve this, there must be no economic distortion of the real economics of electricity supply.
Unfortunately, in South Africa, there has been quite significant economic distortion of the electricity price over the last couple of decades. This has resulted from management problems in organisations such as Eskom, and also from the various Provincial and Municipal authorities dealing with electricity in various uncoordinated ways. In addition, Electricity Policies have often been designed to appease the green element from Europe, as they claimed to be working towards ‘saving the planet.’
A result of all this is that the South African electricity price has continued to climb beyond what is justifiable in terms of ordinary inflation and the Consumer Price Index.
It is necessary to investigate why this state of affairs now exists.
For South Africa, the practical point is clear. A reliable supply of competitively priced electricity is a condition for expanding industrial production, supporting small businesses, attracting investment and creating employment. [R1]
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The Foundation’s approach reflects Leon Louw’s more than four decades of work on economic freedom, consumer choice and practical policy reform. Consistent with that legacy, the impact of a policy on people and markets matters more than the intentions of its authors.
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Electricity prices have risen sharply over recent years. The reasons are complex and include operational and governance failures, maintenance and generation constraints, financing needs, network investment, procurement choices, regulatory decisions and the cost of the generation mix. The Foundation therefore encourages a diagnosis, based on evidence rather than on a single-cause explanation, or indiscriminate criticism of Eskom. Eskom and the wider electricity industry must be financially sustainable, technically competent and accountable. The objective should be to correct failures and reduce inefficient costs, not to weaken the institutions needed to provide a reliable service.
Much criticism has been levelled at Eskom. But Eskom must survive and prosper to produce optimal benefit for the country. For a while now, it has been highly fashionable for the media and populace to attack Eskom. But it is important to study exactly what happened at Eskom, and what happened with electricity price in general, and then try to solve the actual causes, rather than just follow a path of Eskom-bashing.
The Foundation is concerned that political preferences, inefficient procurement and inaccurate cost comparisons are distorting electricity prices. The price of generation alone does not indicate the true cost of a reliable electricity service: the comparison must account for firm capacity, flexibility, balancing, transmission, distribution, storage where relevant, losses, and system reliability. This test must be applied equally to nuclear, coal, gas, renewables, storage and emerging technologies, without prejudging the outcome.
This submission does not oppose renewables generation, nuclear power, coal, gas, storage or any other technology simply because of its category. It supports competition and technology neutrality. But the most important factor is that each option must be assessed on its full, system-relevant cost, reliability contribution, technical performance, environmental and safety requirements, and ability to serve customers at an affordable price.
The Foundation recognises that this policy is a framework rather than a complete tariff schedule. Its impact will depend heavily on subsequent NERSA methodologies, regulations, tariff approvals and implementation choices. The recommendations below therefore seek clear principles, transparent evidence, proportionate regulation and safeguards against unintended consequences.
In discussing electrification and environmental outcomes, it is important to be realistic in the South African context.
It is appreciated that there has been external pressure from countries which are members of the European Union, for example, to conform to standards which they impose. However, much of this is unrealistic and should not be considered valid in the South African context. For example, in Africa in general, the building of modern HELE coal-fired power stations would probably improve air quality, bearing in mind that so many people in Africa are still cooking using home cooking fires. [R12]. One should therefore factor in the reality that modern electricity access for families can displace reliance on traditional biomass fuels and therefore improve living conditions. The public health and development benefits of access to electricity warrant consideration and should not be hindered by a blind conformity to European standards. Any emissions comparison must use consistent lifecycle boundaries, generation assumptions, and measured displacement effects, which are valid for South African conditions, and are not based on an assumption that all our people live in a European social and economic environment.
1.1. Electricity price to the consumer
It is important to note that the price of electricity must be measured at the consumer.
This is an extremely important consideration. Unfortunately, worldwide, there has been huge distortion in the concept of electricity price. This has unfortunately been heavily influenced by international politics related to the concept of human-induced climate change. The existence of human-induced climate change is highly suspect and is not at all clear-cut, as claimed by many, particularly certain groups with somewhat vested interests.
From a technical point of view, it is not true that electricity at any point on an interconnected system is the same and should carry the same price. For example, it costs Eskom a huge amount to move electricity from Mpumalanga to Cape Town. The physics of electrical losses and degradation has to be taken into account. You cannot assume that a kWh of electricity put into a cable in Mpumalanga is the same kWh, at the same price, that comes out in Cape Town.
Therefore, when talking about the price of electricity at the consumer, the generation cost has to be taken into account, plus transmission costs plus reliability factors. The value of electricity which is available. 24 hours a day, seven days a week, is not the same value as electricity which is intermittently available. As an illustration, consider a water supply. If you have a borehole that only works two or three days a week and varies in its output from summer to winter as well, that water is nowhere near as valuable as a tap in the kitchen connected to the municipality, which just works continuously and reliably.
It is false to quote prices of electricity, for example from a solar collector in the Northern Cape, by quoting their selling price, as claimed by them, at their front gate, particularly when this electricity is not available throughout the day and the night. Errors of judgement like this have been clearly indicated in countries such as Germany and the UK, in which the large-scale introduction of wind and solar power has continuously led to price increases, although the countries keep claiming that it will lead to decreases. Nowhere in the world has the introduction of solar and wind for national or industrial purposes led to a price decrease.
It is absolutely imperative to be totally honest and scientifically accurate when quoting electricity prices.
The true System Costs of an electricity system have to be correctly taken into account. The same is true of the Management Costs. The Management Costs consist of people operating control rooms and associated equipment, which has to control the various generation inputs in such a way that a reliable output is delivered to the country.
The diagram shown is an illustration of electricity output from the California Integrated System Operator (CAISO) on 17 June 2025. It is important to note the total stability and reliability of the nuclear band right at the bottom. Similarly for the geothermal output. In stark contrast, one must note the perturbation induced by solar power.
This solar perturbation then causes a number of other outputs to have to be constrained. Many of these constrained outputs are deliberately constrained by the management operators because they cannot allow too much electricity into the system, otherwise, it will crash the system. It would appear to be really obvious that the management and system control of the nuclear and geothermal bands is very easy. But completely the opposite is true of the management of that solar pulse and all the subsequent constrictions and adjustments that have to take place. One can see from the diagram that some of the solar, and possibly some other sources, are then, during the day, routed into batteries. The batteries are then used as the demand rises in the evening. The white line shows the demand, and one can see that the batteries are needed during the evening peak.
While the state of California was using coal power, the coal contribution looked very much like nuclear. However, in November 2025, the State of California stopped using coal-generated electricity when it stopped receiving this electricity from the Intermountain Power Project in Utah. In previous years, California had stopped coal supplies from other sources. This decision was taken for political reasons, to conform to carbon dioxide emissions goals.
Now we have to mention another physics reality. There is a law of physics which states that every time you convert energy from one type to another, you lose some of it. You cannot carry out 100% efficient conversion. At times when a conversion takes place, the loss is something like 25%. In other words, it costs one financially every time you change the energy type. So for example, in moving energy in and out of a battery there is a loss each time it goes in and comes out. It is not legitimate for newspapers to quote that some solar panel, for example, produces some output which goes into a battery and then to leave the assumption that the same amount can be withdrawn from the battery later. It cannot. The consumer pays for those transitions.
1.2. The Municipality consideration
There's a complication at Municipality level which has to be borne in mind and addressed.
There are two factors: The Municipal Levy, and the wide-scale introduction of power sources into the municipal-level grid.
The Foundation supports the freedom of households and businesses to generate, store, and use electricity. It nevertheless recognises a legitimate pricing issue where a customer reduces grid energy purchases but continues to maintain access to the Eskom network and dependable supply.
Traditionally, municipalities place a levy on electricity supply to fund their maintenance and expansion of the Municipal Grid. It is also known that municipalities use some of these funds for other purposes such as installing traffic lights, streetlights, and so on. The municipalities rely heavily on this income.
When some private person or company installs their own solar panels or wind power, that then bypasses the Municipal Levy. What this then means is that those people are not contributing to the local network maintenance and Expansion. Consideration will have to be given to the very fundamentals of policy to address this issue.
On another level, there is also an electrical engineering issue that needs to be addressed.
In the past, all electricity was supplied to households and business premises by the Municipality. So if the Municipality decided to carry out maintenance in some area, all they had to do was switch off the electricity supply to that neighbourhood. Such an action is carried out from a central control system. However, what has evolved now is that large numbers of homeowners and businesses are producing electricity in such a way that it is effectively going ‘backwards into the system’. So the Municipality now faces the problem that it can't necessarily guarantee that an area or part of an area does not carry live electricity after they have switched off the power at the central control. Clearly, when sending repair teams out, it is potentially problematic that a team might assume that the electricity is turned off, but it is not. So, engineering decisions will have to be taken on how private solar or wind systems are connected, so that problems like this do not endanger other people.
2. Summary
The electricity price is fundamental to economic growth and the GDP. The electricity price has been going up too rapidly. This rise has to be curtailed, or it will be damaging to the lifestyle of all citizens and to the industrial base of the country.
Why is this price rise taking place?
It came about through various factors such as mismanagement within the electricity generators, the primary one being Eskom, and also from political inducement resulting from various policies that have been influenced by countries in the European Union. Some of this has had heavy foreign political influence related to concepts such as human-induced climate change. It is our contention that human-induced climate change essentially does not exist and is not a problem. But we appreciate the political pressure involved with these ideas.
With the advent of new technology such as small modular reactors and also solar systems and wind systems, it is now possible for there to be numbers of mini-grids which operate independently of the National Grid. We are in favour of such mini-grids, but we do realise that they have to have criteria applied to them such that they are not incompatible with general electricity requirements.
We also note that an increase in electricity price in turn causes more consumers to use less electricity and to change their lifestyles. A result is that they look for alternative electricity. These actions induce other economic actions, such as inducing Eskom to increase the price as sales decline, and also the rapid rise in the private solar market.
We note that this is all a complex interaction which needs careful consideration.
The Foundation's detailed comments on all 54 policy positions follow. These comments are recommendations for improvement, not a claim that every implementation detail can be settled in the policy itself.
3. Specific Aspects of the EPP
Review of Policy Positions 1–54
For each policy position, the Foundation indicates its general view and the amendment or safeguard it recommends. Where a position is supported in principle, support is conditional on implementation that is transparent, proportionate, and focused on efficient cost and consumer welfare.
3.1. Revenue requirement, asset valuation and investment prudency
Foundation view: Support with amendment
A sustainable utility must be able to finance prudent maintenance, replacement and new investment. However, asset valuation and allowed returns can materially affect prices. NERSA should publish its methodology, assumptions, treatment of historic assets, depreciation, debt and risk, and allow stakeholder challenge. Revenue recovery must not guarantee reimbursement of inefficient and irregular expenditure.
Regulatory stability and incentives to reduce costs should be explicit.
3.2. Policy Position 2: Cost-reflective tariffs
Foundation view: Support with safeguards
Prices should signal the efficient costs caused by consumption and supply. Cost-reflective pricing is not the same as accepting every cost submitted by a licensee. NERSA should test procurement, staffing, losses, financing and capital expenditure against prudent benchmarks. The proposed five-year transition should include published milestones, customer impact assessments and protections against abrupt tariff shocks. Any subsidy should be identified separately, with its purpose, beneficiaries and funding source disclosed.
3.3. Transparency and unbundling on customer bills
Foundation view: Support
Itemised bills can help customers understand energy, capacity, network, service, tax, levy and subsidy components. The Department should require plain-language explanations and comparable formats across suppliers. Disclosure must be accurate and useful rather than an unreadable list of accounting entries. Municipal bills should distinguish electricity charges from municipal surcharges and non-electricity services. Customers should be able to challenge errors and access the underlying tariff schedule.
3.4. Non-discrimination
Foundation view: Support with clarification
Comparable customers should not be treated differently without a defensible reason. However, tariffs need not be identical where cost drivers differ, such as voltage, load factor, location, demand profile, connection cost, reliability requirements or contractual flexibility. Both Eskom and municipalities should be able to charge different prices at different times of the day (Time-of-Day Tariff) should they wish, to ensure optimum supply of their electricity. They should also be able to supply large users with discounted prices should they wish. It is reasonable to supply large volumes of guaranteed purchase at a discount price. This is done by all sorts of commodity suppliers who provide discounts for large-volume purchases. However, the suppliers must be able to demonstrate sound economic reasons for providing discounts, and it must not be done for political reasons or for reasons that are actually a hidden cross-subsidy paid for by somebody else.
3.5. Access to and use of networks/wheeling
Foundation view: Strong support with safeguards
Open and non-discriminatory access is important to competition and consumer choice. Use-of-system and wheeling charges should recover efficient network, administration, balancing and incremental costs without being used to deter third-party supply. NERSA should publish standard agreements, service levels, timelines, congestion rules and dispute resolution. Charges must avoid both economic bypass and the protection of incumbent suppliers.
Independent local systems and microgrids should not be required to incur national transmission costs where they do not use that network. Where a local system seeks an interconnection, the terms should reflect the actual services and standby capacity requested. The policy should distinguish genuine islanded supply from grid-connected wheeling and retail access.
As indicated in the introductory portion of this document, the costs of supply must be honestly applied. This will include System costs and Management costs. As indicated above one kWh of electricity inserted into the system hundreds of kilometres away is not the same value as one kWh extracted at a consumer. This reality has to be taken into account.
3.6. Special products and tariffs
Foundation view: Support
Flexible, interruptible, critical-peak and real-time products can help match demand to system conditions. Tariff innovation should not be trapped in slow approvals. NERSA should set a time-bound approval process and allow pilots with transparent evaluation. The policy should expressly permit negotiated tariffs for customers offering measurable system value, including load shifting, controllable demand, storage or ancillary services, while protecting against discriminatory treatment and hidden subsidies. However, Eskom should not be induced to pay for electricity produced by a supplier, which is not required by Eskom. This practice distorts the real cost of such electricity. The result is that the consumer pays a higher price.
3.7. Long-term price outlook
Foundation view: Strong support
A five-year or longer price path can improve investment and household planning. The outlook should be published on a consistent timetable and show assumptions, uncertainty ranges, and separate contributions from generation, transmission, distribution, taxes, levies and subsidies. It should compare scenarios for different demand growth, fuel prices, procurement costs, generation mixes and private generation. The forecast should be informative rather than a promise of fixed future prices.
3.8. Scope of generator pricing policy
Foundation view: Support with technology neutrality
The policy should apply consistently to relevant licensed and registered generators and approved imports, while avoiding unnecessary regulation of genuinely private arrangements outside public networks. Technology labels should not determine regulatory treatment. Comparable services should face comparable rules, subject to legitimate differences in scale, safety, network impact and market role. The Department should clarify the treatment of small embedded generators, aggregators and storage as market arrangements evolve.
3.9. Generator tariff structures
Foundation view: Support
Energy, capacity and ancillary-service components can reveal the cost and value of different services. Prices should reward availability and performance when those services are needed and should not obstruct least-cost dispatch. NERSA should require consistent methods for measuring capacity value, availability, balancing and ancillary services. All technologies should compete on equivalent service definitions and reliability assumptions, not on selective cost categories or politically preferred labels.
A fair comparison must distinguish energy delivered at a particular time from dependable capacity and other system services. All technologies should be eligible to compete to provide the services they can reliably deliver, subject to transparent performance verification.
3.10. Generator price levels and power purchase agreements
Foundation view: Support with stronger competition safeguards
Regulatory or contract-based prices can provide certainty, but long-term procurement decisions can lock consumers into expensive obligations. New power purchase agreements should be assessed before commitment using transparent, comparable whole-system costs, demand forecasts, risk allocation and sensitivity analysis. Procurement should be competitive wherever practical. Emergency and short-term purchases need a faster approval route, but the reasons, prices, duration and safeguards should be published later to ensure transparency.
Before committing consumers to a new long-term contract, publish the relevant whole-system cost assumptions and consider competitive alternatives, including distributed or local supply where practicable.
3.11. Wholesale time-of-use and capacity/standby charges
Foundation view: Support with design safeguards
Time-of-use pricing can reduce peaks when customers can shift consumption. Capacity or standby charges can be justified where a customer requires the system to reserve capacity or provide reliable backup. They should be based on measurable cost drivers, and applied consistently, not used as a penalty for solar, storage or other private generation. Charges should recognise verified reductions in coincident peak demand and allow customers to choose service levels appropriate to their needs.
A grid-connected self-generator that reserves backup capacity should pay an evidence-based charge for that service. Conversely, a truly independent local network should not face charges for standby services it neither requests nor receives.
3.12. Central Purchasing Agency and legacy PPAs
Foundation view: Support the transition, subject to accountability
A Central Purchasing Agency may help administer legacy power purchase agreements while the market develops. Its mandate, governance, procurement powers, risk exposure and reporting duties must be clear. Legacy costs should be disclosed separately and recovered through a transparent method, not hidden in unrelated tariff components. The CPA should not become a permanent barrier to direct contracting or competition. Any new procurement role should be justified and subject to independent oversight. Eskom should be able to purchase electricity when it genuinely needs it and not be induced to pay for electricity when it does not require it, merely to satisfy a contract entered into for political reasons or other reasons that Eskom did not control.
3.13. Wholesale energy tariff and over/under recovery
Foundation view: Support with safeguards
Wholesale prices should reflect the cost of energy, capacity and services, with a timely mechanism for genuine over- or under-recovery. The mechanism must not become an automatic pass-through of forecasting errors or inefficient purchases. NERSA should set clear triggers, time limits, reconciliation rules and disclosure requirements, including who bears the cost of errors and when adjustments affect customers.
3.14. Ancillary services and related charges
Foundation view: Support
System services such as reserves, frequency control, black start and reactive support have real value and should be procured transparently. Eligibility should be based on technical capability rather than generation technology. Where consumers, storage providers or generators can supply these services, they should be able to compete under published technical and commercial rules. Costs and benefits should be measured and reported.
3.15. Generation standby charges
Foundation view: Support only where cost-causal
A customer with its own generation may still rely on the grid for backup or for periods when its equipment is unavailable. A fair standby charge can reflect the capacity actually reserved and the reliability service required. It should not be a blanket penalty on self-generation. The methodology should account for coincident peak demand, contracted capacity, outage performance, demand response and the extent to which private generation reduces or increases system costs. Customers should have a choice of clearly defined standby service levels.
3.16. Allocation of transmission costs between generators and customers
Foundation view: Do not endorse a rigid 50/50 split without evidence
The proposed allocation of transmission costs between generators and customers should be supported by transparent cost-causation analysis, not an arbitrary percentage. Different network investments may be driven by generation connection, customer demand, system security, regional development or a combination of factors. NERSA should publish modelling and test alternative allocations for their effects on electricity prices, generation investment, exports, industrial competitiveness and consumer bills. The methodology should be reviewed as the generation mix and network use change.
Cost allocation must follow demonstrable use and cost causation. In particular, customers supplied entirely through an independent local network should not be allocated national transmission costs merely because the national network exists.
3.17. Transmission tariff levels
Foundation view: Support with efficiency and predictability requirements
Transmission revenue must be sufficient to maintain a safe, reliable network and finance prudent expansion, but allowed costs should be benchmarked and scrutinised. Tariff structures should distinguish fixed network costs from usage-related drivers where practical. NERSA should publish assumptions on asset values, depreciation, financing, losses and investment plans. Multi-year decisions should give investors predictability while allowing adjustments for material changes and verified efficiencies.
3.18. Transmission investment, refurbishment and maintenance
Foundation view: Strong support
Deferring necessary maintenance can create outages, losses and larger future costs. The policy should support planned, evidence-based investment and require transparent prioritisation of projects by reliability, safety, congestion relief and economic benefit. Investment plans should be independently tested, with delivery milestones and public reporting on cost, schedule and performance. Consumers should not pay for unused or imprudently selected assets without a demonstrated system need.
3.19. Geographic and generator-related transmission pricing
Foundation view: Support subject to impact analysis
Locational signals can help reveal the cost of connecting and delivering electricity, but poorly designed charges can deter efficient generation or place disproportionate burdens on regions with fewer economic alternatives. NERSA should assess how proposed charges affect new generation, existing assets, industrial sites, cross-border trade and regional development. Charges should reflect defensible long-term network costs and reliability benefits, with transition arrangements where abrupt changes would undermine investment already made.
3.20. Transmission cost allocation and changing generation mix
Foundation view: Support a forward-looking methodology
The network will change as generation and demand move geographically and as embedded generation grows. Cost allocation should not rely only on historic flows or a single peak measure. It should consider forecast demand, generation location, system security, network utilisation, congestion and the value of capacity. Methodologies and data should be public, with periodic review and stakeholder input.
3.21. Transmission charges for international transactions
Foundation view: Support
Cross-border users should pay applicable and transparent charges for the network and services they use, consistent with regional arrangements. Charges should not discriminate arbitrarily between domestic and international users, nor undermine mutually beneficial trade. The Department should clarify how wheeling, losses, congestion, reserves and ancillary services are allocated, with consistent settlement and dispute procedures.
3.22. Cross-border sales and purchases
Foundation view: Support with clarity
Regional electricity trade can improve security and use existing assets more efficiently. Pricing should follow applicable Southern African Power Pool rules and approved agreements, while transparently allocating transmission and system-service costs. The policy should distinguish energy traded into South Africa from energy wheeled through the country and avoid charging domestic customers for costs properly attributable to international transactions.
3.23. Distribution pricing principles
Foundation view: Support with safeguards
Distribution tariffs should reflect the efficient costs of connection, network capacity, maintenance, metering and customer service. But the transition must not make essential electricity unaffordable or create charges unrelated to cost causation. NERSA should require comparable cost-of-supply methods and disclose the impact on household, commercial, industrial and embedded-generation customers. Distribution costs must be separated from municipal services funded through rates or other lawful revenue sources.
3.24. Distribution cost reflectivity and tariff design
Foundation view: Support, with staged implementation
A move towards cost-reflective distribution tariffs can improve signals for investment and consumption. It should be based on reliable data and a standard methodology, not a one-size-fits-all tariff that ignores local differences. The policy should require published impact assessments, reasonable transition periods and an opportunity for customers to select among tariffs where technically feasible.
3.25. Cost-of-supply and cost-to-serve studies
Foundation view: Strong support
Regular studies can identify which costs are caused by different customers and services. NERSA should set a transparent common methodology, minimum data standards, independent verification and publication requirements. Studies should be updated at least every five years as proposed, and sooner when material structural changes occur. The results should inform tariffs but should not be treated as unquestionable: assumptions, allocation choices and data limitations must be disclosed and open to challenge.
3.26. Customer categories
Foundation view: Support with flexibility
Customer categories can simplify tariffs, but categories should reflect genuine differences in load profile, voltage, capacity, service requirements and cost to serve. They should not preserve historical privileges or penalise customers simply because they are small, large, urban, rural or self-generating. NERSA should periodically review categories and permit a customer to move to a more suitable tariff when its usage profile changes.
3.27. Tariff structures and fixed/demand charges
Foundation view: Support if cost-based and optional where feasible
Demand and energy charges can better reflect network costs than a purely volumetric tariff, particularly when consumption falls, but network capacity remains necessary. However, excessive fixed charges can burden low-use households and reduce the reward for conservation. Charges should be supported by cost studies, designed to avoid double recovery, and accompanied by understandable bills and suitable lifeline arrangements for qualifying customers.
3.28. Rationalising electricity tariff structures
Foundation view: Support with consumer safeguards
Standardisation can reduce complexity and improve comparison, but should not eliminate justified local or customer-specific tariffs. NERSA should rationalise tariffs around common principles and definitions while retaining options for time-of-use, demand, voltage, connection and other demonstrable cost differences. Any tariff withdrawn should have a published reason, impact analysis and a fair transition period.
3.29. Time-of-use tariffs and tariff options
Foundation view: Support
Time-of-use prices can encourage customers to shift consumption to lower-cost periods. The price differential should reflect the actual cost of supply and system conditions, and be communicated in advance. Customers should have access to suitable metering and understandable information. Where a customer cannot reasonably shift usage, NERSA should consider transition protections rather than imposing a tariff that offers no practical choice.
3.30. Distribution use-of-system charges and wheeling
Foundation view: Support with anti-discrimination safeguards
Customers who buy from another supplier still use distribution infrastructure and should pay fair, cost-based use-of-system charges. The charges should not duplicate costs already recovered elsewhere or be set to block competition. NERSA should define standard calculations, loss factors, billing responsibilities, crediting and settlement arrangements. Network costs should be allocated to the users and services that cause them as accurately as practical.
3.31. Wheeling and treatment of energy supplied by third parties
Foundation view: Strong support with clear rules
Wheeling can expand consumer choice and encourage new investment. The policy should ensure that wheeled energy is measured and credited consistently and that customers remain responsible for legitimate network, metering, balancing and administration charges. Agreements should be standardised where possible, with transparent timelines and dispute resolution. Municipalities and utilities should not be permitted to impose arbitrary barriers or fees.
However, it is also recognised that wheeling must reflect the genuine price as applicable at the consumer, as indicated in the introductory parts of this document. One kWh inserted at one end of a transmission line is not the same as one kWh extracted some hundreds of kilometres away. This reality should be borne in mind, and certain consumers must not get a price advantage, essentially at the expense of others.
3.32. Retail charges
Foundation view: Support
Retail charges can recover reasonable costs of metering, billing, customer support and energy trading. NERSA should distinguish efficient service costs from avoidable inefficiency and require disclosure of retail margins and service standards. Customers should be able to compare offers and understand which services are included. The rules should permit innovation in billing and customer service rather than entrenching a single delivery model.
3.33. Net billing and embedded generation exports
Foundation view: Support with a fair value methodology
Customers exporting electricity should receive a transparent credit based on the value of energy delivered and the costs the distributor avoids, as appropriate. The methodology should consider time of export, losses and system value, and should be reviewed as market conditions change. Export credits should not be set artificially high or low to favour a technology. Equally, network charges should reflect actual use and reserved capacity, not serve as a punitive response to self-generation.
3.34. Wheeling credits, billing and settlement
Foundation view: Support with standardisation
The policy should ensure that wheeled energy and related credits are visible on customer bills and settled within defined timeframes. NERSA should standardise data exchange, meter requirements, loss allocation, credit rates and dispute handling. Rules should be workable for municipalities, distributors, traders and customers of different sizes, with proportionate requirements for smaller participants.
3.35. Demand-side flexibility and demand response
Foundation view: Strong support
Customers who reduce or shift demand during constrained periods can avoid expensive peak generation and network investment. Tariffs and programmes should reward verified system value, with clear measurement and payment rules. Participation should generally be voluntary and based on informed agreement. NERSA should compare demand response with supply-side alternatives on a consistent cost-per-reliable-capacity basis.
3.36. Time-of-use and other energy charges
Foundation view: Support with choice
Tariffs should communicate when electricity is more or less costly to provide. Time-of-use structures are useful where metering and customer behaviour make them effective. NERSA should avoid assuming that all customers can shift consumption equally, and should provide clear comparisons of likely bills before mandatory tariff changes. The policy should allow customers to choose an appropriate tariff when technically feasible.
3.37. Voltage, location and network cost differences
Foundation view: Support if objectively justified
A tariff may reflect voltage level, distance or network location where these factors materially affect the cost of serving a customer. The method must be transparent and consistent, and should not be used to create arbitrary regional penalties. Any locational signals should be tested for their effect on investment and regional economic development, with transition rules where needed.
3.38. Tariffs that do not reflect cost causation
Foundation view: Support with qualification
The policy's concern about tariff structures that send misleading price signals is reasonable. Inclining block tariffs and other simplified structures may serve explicit affordability or administrative purposes. However, such measures should be identified as policy choices rather than presented as cost-reflective prices. Any subsidy or cross-subsidy should be quantified, targeted and funded transparently.
3.39. Connection charges and customer-funded assets
Foundation view: Support
Customers should not pay twice for assets already funded through grants, connection fees or transferred infrastructure. Regulatory accounts should identify these assets, exclude them appropriately from the asset base for return and depreciation, and separately plan for replacement costs. Standard connection methodologies should be transparent and applied consistently so that new entrants and customers are not disadvantaged.
3.40. Public lighting
Foundation view: Support separation from electricity supply costs
Street lighting and other public lighting are municipal services that consume electricity; they are not the same as supplying electricity to individual customers. Costs should be identified separately and charged to the appropriate municipal owner. If the municipality funds the service through an MSOE or another lawful source, that funding should be transparent, authorised and accountable. Electricity tariffs should not conceal public lighting costs in the cost of supplying unrelated customers.
3.41. Refurbishment and maintenance of distribution networks
Foundation view: Strong support
Distribution maintenance backlogs can reduce reliability and increase long-term costs. NERSA should assess maintenance plans against asset condition, safety, service quality and efficient lifecycle cost. Approved funding should be linked to delivery and reporting, while allowing utilities to recover prudent expenditure. Persistent underperformance or unnecessary expenditure should trigger corrective action rather than automatic tariff increases.
3.42. Distribution losses and bad debt
Foundation view: Support with careful benchmarking
Non-technical losses and bad debt affect utility finances, but consumers should not automatically bear losses caused by poor controls, weak billing or failure to enforce payment rules. NERSA should set realistic, differentiated standards using data and comparable distributors. It should distinguish unavoidable losses from preventable losses and account for local conditions. Utilities should be rewarded for reducing losses and improving collection, while due process and protections for vulnerable customers are preserved.
3.43. Measurement and treatment of technical/non-technical losses
Foundation view: Support with clarification
The policy should avoid double counting losses or bad debt across the revenue requirement and tariff components. NERSA should define data, auditing, reporting and review rules and explain how the approved standard changes over time. Customers should be able to see how losses affect tariffs. Any disallowance should follow a transparent process and distinguish management failure from factors outside a licensee's reasonable control.
3.44. Reseller charges and consumer protection
Foundation view: Support with proportionality
Rules for resellers can protect tenants and other end users from opaque mark-ups, but must not impose disproportionate administration on small landlords or body corporates. NERSA should distinguish resale of electricity from a separate, genuine service charge and set clear rules for metering, disclosure, disputes and remedies. End users should receive an itemised statement and should not pay for electricity or network services twice.
3.45. Electricity vending services
Foundation view: Do not impose price controls without evidence
Transparent fees and consumer redress are legitimate aims. However, a mandatory standardised fee and allowable commission structure could suppress competition or prevent providers from recovering different costs. NERSA should first assess the market, publish evidence of consumer harm and prefer disclosure, portability, competition and complaint-handling requirements. Any fee controls should be proportionate, periodically reviewed and limited to demonstrated market failures.
3.46. Tariffs for organs of state
Foundation view: Amend to allow transparent public-policy exceptions
Government departments and public institutions should generally face transparent, cost-reflective tariffs and should budget for their electricity use. However, an absolute ban on preferential tariffs may be too rigid where a transparent, lawful public programme deliberately supports schools, clinics or other essential services. Any exception should be explicitly funded by the responsible public budget, not hidden in the utility's accounts or shifted to other consumers.
3.47. Municipal Surcharge on Electricity (MSOE)
Foundation view: Strong support for transparency; strengthen revenue separation
The policy is right to address opaque municipal surpluses and double recovery. Electricity bills should separately show the utility charge, network charge and MSOE. The surcharge should be lawfully authorised, justified, ring-fenced or transparently accounted for, and subject to appropriate oversight. Municipalities should not use electricity pricing to conceal the cost of unrelated services. At the same time, the framework should provide a realistic transition so that essential municipal services are not abruptly left unfunded; any replacement funding should be transparent and decided through the proper budget process.
3.48. Demand- and supply-side flexibility funding
Foundation view: Support with measurable outcomes
Funding for flexibility can be worthwhile where it is cheaper than building or operating additional capacity. NERSA should require a business case, cost-benefit analysis, transparent accounting and ex-post reporting. Programmes should be compared with alternatives on a consistent basis and should not become open-ended allowances. Funding should be released against defined outcomes and should not duplicate costs recovered elsewhere.
3.49. Utility-owned embedded generation
Foundation view: Support with competitive neutrality
Utilities may offer solar, microgrids, storage or other embedded-generation products where customers want them and the service is efficient. These activities should be separately accounted for and should not receive hidden advantages from monopoly network revenues. Customers should be free to choose competing providers. The regulator should assess actual costs, reliability benefits and avoided network costs, and prevent cross-subsidisation between regulated monopoly functions and competitive services.
3.50. National subsidy framework
Foundation view: Support with strong transparency requirements
A national framework can make subsidies visible. It should identify who benefits, who pays, the policy objective, the annual cost, and the exit or review conditions. Affordability support should be targeted using evidence and funded explicitly where it serves a social objective. The framework must avoid allowing politically attractive subsidies to obscure the true price of electricity or weaken incentives to conserve energy and invest efficiently.
3.51. Lifeline tariff for qualifying customers
Foundation view: Support as a targeted affordability measure
A lifeline tariff can protect low-income households, particularly if it avoids fixed charges that are disproportionate for low consumption. Eligibility rules must be fair, workable and regularly reviewed. The policy should clarify how the 60-amp limit and nominal connection fee apply and how households in different housing arrangements are treated. The cost should be disclosed and its funding identified so that it does not silently burden other customers.
3.52. Free Basic Electricity
Foundation view: Support with public-budget accountability
Free Basic Electricity can support access to an essential service, but the benefit, eligibility and cost should be transparent. The policy's proposed budget provision and two-year impact review are welcome. The review should assess coverage, adequacy, administration, unintended exclusion, fiscal sustainability and the effect on tariffs. Funding should be predictable and should not rely on opaque cross-subsidies that make electricity more expensive for other households or businesses.
In principle, the Foundation is opposed to Free Basic Electricity. We believe that all Electricity and Services should be paid for. So a more attractive option would be to not have free basic electricity, but to have an extremely low tariff for that electricity. This then trains those consumers to actually pay, and also to conserve even that very low-rate electricity if they don't need to use it. Anything that is free immediately causes an action to use it, even in an irresponsible manner. Also, free electricity then presents a problem where these people have to pay for the other electricity at a normal rate. We believe that going from free to full rate causes social problems and is an inducement for criminal behaviour to evolve.
3.53. Free Basic Alternative Energy
Foundation view: Support with targeting and delivery safeguards
Support for households without grid access is reasonable, provided the programme is targeted, safe and suitable for local needs. Municipalities should publish eligibility criteria, selected energy carriers, delivery standards and complaint routes. Beneficiaries should be consulted about practicality, maintenance and recurring costs. Programme evaluation should test whether assistance reliably meets basic energy needs and whether public money is used efficiently.
The idea of free electricity is noted in 3.52. above.
3.54. Negotiated Pricing Agreements (NPAs)
Foundation view: Support in principle, with transparent public-benefit tests
Negotiated prices may preserve or attract investment, jobs and productive capacity, including in remote areas or Special Economic Zones. A lower price can be in the wider public interest if the activity creates benefits that outweigh the cost. But the utility should not be required to sell below efficient cost unless the arrangement is commercially justified for the utility or the shortfall is explicitly funded by government or another agreed beneficiary. NPA assessment should publish eligibility criteria, cost-of-supply calculations, duration, risks, expected investment and employment outcomes, and the identity of the party bearing any subsidy. Existing contracts should be honoured, subject to their terms and applicable law.
A Special Economic Zone or large industrial campus may be supplied by an on-site or nearby independent generation-and-distribution system, potentially including a small modular reactor. The option should be assessed against grid extension and interconnected supply on a transparent whole-life, whole-system basis. Any preferential tariff should first be justified by the actual cost to serve. An economic-policy discount must have an identified and accountable funding source.
4. Positive Features
The Foundation acknowledges several constructive features of the EPP:
The policy recognises the need for cost-reflective tariffs and financially sustainable electricity services.
It promotes clearer bills and the unbundling of key charges, levies and subsidies.
It supports non-discriminatory network access and provides a policy basis for wheeling, and greater consumer choice.
It proposes multi-year price information that can assist investment and household planning.
It recognises that energy, capacity and ancillary services have different costs and values.
It proposes cost-of-supply and cost-to-serve studies, and more explicit treatment of subsidies.
It acknowledges the importance of maintenance, refurbishment, demand flexibility and network investment.
It recognises the need to administer legacy PPAs and negotiated pricing arrangements transparently.
These features should be retained and strengthened. The Foundation's concerns are primarily about how the principles are defined, how costs are verified, and whether implementation will preserve competition and consumer choice.
5. Concerns Regarding Freedom, Competition and Constitutional Principles
5.1. Regulatory discretion and accountability
The policy assigns NERSA substantial responsibility for methodologies, tariff structures, cost allocation, approvals and subsidy treatment. That role is understandable in a sector with natural-monopoly networks, but discretion must be constrained by published rules, evidence, reasons and review. Methodologies should be consulted on publicly, decisions should explain how submissions were considered, and affected parties should have access to timely and effective dispute resolution.
5.2. Consumer choice and market entry
The transition to a more competitive market should expand choice of supplier and technology. Network tariffs, standby charges, registration rules, wheeling processes and billing requirements should be proportionate to actual costs and risks. They should not be designed to preserve a monopoly position or to make independent supply uneconomic by administrative means. Consumers should be able to choose between tariffs and suppliers where technically and commercially feasible.
5.3. Market distortion and generation-cost claims
Claims about the relative cost of coal, nuclear, renewable generation, storage and other options should be assessed using consistent assumptions. A headline price per unit of energy is not necessarily comparable with the cost of dependable supply. The Department should publish whole-system comparisons that include capacity value, balancing, reserves, transmission, distribution, financing, fuel, decommissioning and other relevant costs. The same evidentiary standard should apply to every technology. The Foundation does not ask the Regulator to favour a preferred technology; it asks for transparent, technically credible and economically comparable assessment.
The reference [R10] usefully distinguishes between total energy (MWh) and the power (MW) actually available when customers need it. Electricity-price comparisons should therefore disclose timing, availability, capacity contribution and any balancing or standby requirement. Reference [R9] similarly argues that scientific feasibility must be considered alongside economic viability and applicable rules.
5.4. Embedded generation, standby supply and safety
Private solar and other embedded generation can benefit customers and diversify supply. They can also leave a customer reliant on the public grid for backup and can create technical and cost-recovery issues. The EPP should establish the principle that charges reflect the capacity and services a customer uses or reserves, and that exports receive fair, transparent credit. Technical rules should cover registration, inverter protection, anti-islanding, safe isolation, metering, inspections and communication with network operators. Liability for injury or damage should be clearly allocated among equipment owners, installers, operators and network entities according to applicable law.
5.5. Municipal revenue and fiscal transparency
Municipalities need sustainable funding for electricity networks and other lawful municipal services. However, electricity customers should not face opaque charges or be made to subsidise unrelated services without clear authority and disclosure. The MSOE should be shown separately, its purpose and calculation explained, and any transition away from existing surpluses carefully planned. If public policy requires electricity users to contribute to roads, street lighting or other services, that contribution should be authorised and transparent rather than concealed in electricity supply costs.
5.6. Industrial tariffs, regional development and subsidies
A uniform tariff is not always economically optimal. A large industrial customer may offer predictable demand, improve utilisation of existing assets, support local employment and attract suppliers. A Special Economic Zone may use competitive electricity pricing as part of a regional development strategy. Such arrangements should be judged on transparent evidence of net public benefit, not political favour. Where a discounted tariff is not commercially beneficial to the utility, the responsible government or development authority should identify and fund the subsidy. This avoids transferring the cost silently to other customers or weakening the utility.
5.7. Legal certainty and constitutional principles
Electricity pricing decisions affect property, investment, contractual expectations, access to essential services and the ability to conduct business. The EPP and its implementation should be consistent with the Constitution and applicable legislation, including the Electricity Regulation Amendment Act, 2024, municipal finance and governance requirements, competition law and administrative-justice principles. This submission does not offer a concluded legal opinion that any specific policy position is unconstitutional. It recommends that the Department obtain legal review of material tariff powers, municipal surcharges, data requirements, compulsory charges and the treatment of existing contracts before implementation.
5.8. Cost recovery must be matched by efficiency and accountability
The financial sustainability of Eskom and other licensees matters to the public. A utility that cannot maintain its assets or obtain reasonably priced capital cannot provide reliable service. But financial sustainability is not a justification for passing every cost to customers. Revenue decisions should be conditional on prudence, efficiency, service quality and credible investment plans. Consumers should not bear avoidable costs arising from poor procurement, weak controls, excessive losses or uncompleted projects.
5.9. Independent local supply and freedom to choose network arrangements
The freedom to establish lawful local generation and distribution should be protected alongside non-discriminatory access to the national grid. Mandatory national-network participation or charges for services not used would unnecessarily restrict entry and may make remote industrial and community projects uneconomic. Appropriate safety, licensing, consumer-protection and environmental rules remain essential. Regulatory choices should be supported by published cost-benefit analysis rather than a presumption in favour of centralisation. [R4–R6]
5.10. International lessons on pricing and market participation
The United States Department of Energy explains that tariffs can distinguish energy use, time of use, demand and fixed services, illustrating why transparent, service-based charging is preferable to an undifferentiated unit price. US Federal Energy Regulatory Commission Order No. 2222 provides an example of allowing aggregated distributed energy resources to participate in wholesale electricity markets, subject to system and regulatory requirements. These examples are not directly transplantable to South Africa, but they demonstrate that efficient network cost recovery and expanded market participation can be pursued together. [R2–R3]
International comparison: France and Germany. In 2025, nuclear power supplied approximately 70% of French electricity, while wind and solar supplied about 45% of German electricity; Germany had ended domestic nuclear generation in 2023. Fossil fuels accounted for about 5.2% of French generation and 41% of German generation [R14–R15]. Eurostat’s comparable household tariff series (first half of 2025, band DC, including taxes) records Germany at €0.3835/kWh and France at €0.2612/kWh [R13]. Ember’s June 2026 monthly series reports generation carbon intensity around 30 gCO₂/kWh for France and 275 gCO₂/kWh for Germany [R17]. These observations show materially different outcomes, but do not by themselves prove that generation mix alone caused the price gap. But what these numbers clearly indicate is that German electricity is far more expensive than French, and the Germans produce far more carbon dioxide than the French. But Germany went into the large-scale renewable energy option with the expectation of reducing its CO2 dramatically. This has not happened.
Political commentary should be distinguished from statistical evidence. In an October 2026 interview with The Economist, Alice Weidel sharply criticised Germany’s nuclear phase-out and Energiewende, describing its energy policy in exceptionally negative terms [R16].
The Foundation accordingly recommends that all future EPP implementation studies publish time-matched generation, price and carbon-intensity data; separate generation costs from taxes, networks and policy levies; and assess reliability and firm-capacity costs on a consistent basis across technologies. This must be applicable to South African conditions and circumstances and not those of Europe.
5.11. Independent local grids, microgrids and industrial supply
The EPP should avoid assuming that all electricity must be generated for, transported over, or purchased through a single national network. A large country with dispersed industry and communities should permit independent local electricity systems, microgrids and direct supply arrangements.
With the rapid development of Small Modular Reactors (SMR) taking place, it is now distinctly possible to have independent Microgrids around an SMR. These can be independent of the National Grid. A Microgrid could be at an industrial area, an SEZ, or gold mine, for example, and need only be something like 2 to 5 kilometres in diameter.
The same is true of small systems based on solar or wind power which are privately owned and do not connect to the National Grid.
These options should be allowed to compete with centrally supplied power, but must do so with equal Criteria. Such as being technically safe and compliant with relevant legislation.
Interconnection with the National Grid could be allowed in due course, if all technical criteria for the connection are scrupulously adhered to. Such a connection can offer major advantages, including shared reserves, wider market access and reliability support. Rather, policy should leave room for both interconnected and islanded solutions, with the choice guided by total delivered cost, resilience, quality of supply, safety and customer needs. The US Department of Energy describes microgrids as systems that may operate connected to the wider network or independently; the World Bank and IEA also identify mini-grids as important options where conventional network extension is uneconomic or delayed. [R4–R6]
A practical example is a Special Economic Zone, mine, industrial estate or data-center campus supplied by generation close to the point of demand. A Small Modular Reactor would be a firm-generation option, alongside other technologies or combinations of technologies. Such a project could avoid substantial new transmission infrastructure where no grid connection is required. It would still need to satisfy all applicable electricity, environmental, safety and, where relevant, nuclear licensing requirements. The comparison must include lifecycle cost, financing, fuel, maintenance, reserve arrangements, reliability, decommissioning and any costs of optional interconnection.
Local supply is not novel in principle. Early electricity distribution systems, including the 1882 Pearl Street Power Station of Thomas Edison in New York, began as local networks; later interconnection brought important benefits of scale and shared reliability. The historical lesson is to permit network structures to evolve as technology, demand and economics change, rather than mandate a single topology for every project. [R7]
The Foundation recommends an express policy clarification that independent local grids and microgrids may be licensed, registered or exempted, as applicable, under clear and proportionate rules; that customers should not pay for national-network services they do not use; and that fair, cost-based arrangements should apply if they later request interconnection or backup.
6. Conclusions and Recommendations
The Freedom Foundation supports a pricing framework that makes reliable electricity more affordable over time, strengthens investment and competition, and protects customers from hidden or inefficient costs. The EPP should be amended or implemented in a way that gives practical effect to the following recommendations:
Make reliable, affordable electricity and economic growth the central outcomes against which the EPP is evaluated.
Require transparent, whole-system comparisons of generation and procurement options, including reliability, capacity, balancing, storage where relevant, and network costs.
Permit regulated utilities to recover prudent and efficient costs, while disallowing avoidable inefficiency and requiring evidence for capital expenditure and losses.
Publish clear NERSA methodologies, assumptions, reasons for decisions, stakeholder responses and effective dispute-resolution procedures.
Design time-of-use, demand, capacity, standby and network charges around demonstrable cost drivers, with protection against double recovery and punitive treatment of private generation.
Ensure private embedded generators pay fair charges for reserved grid capacity and services, receive fair credits for exports, and comply with safe connection and isolation standards.
Guarantee practical, non-discriminatory network access and efficient wheeling processes, with standard contracts, timelines and transparent congestion rules.
Reject a rigid 50/50 transmission-cost allocation unless independent modelling shows it is justified; adopt a cost-causation methodology that is periodically reviewed.
Make all municipal electricity charges and the MSOE separately visible, legally authorised, transparent and accountable. Separate the costs of electricity supply from unrelated municipal services.
Allow transparent, evidence-based industrial and regional development tariffs where they produce net public benefit. Identify who funds any subsidy and do not impose an unexplained shortfall on the utility.
Target affordability support and publish its beneficiaries, total cost, funding source and review criteria. Prefer explicit budget funding for social-policy objectives where practicable.
Provide a predictable multi-year price path with scenarios and sensitivity analysis, updated to reflect actual costs, investment needs and changes in the generation mix.
Require regular reporting on reliability, maintenance delivery, network losses, procurement outcomes, tariff impacts and the effectiveness of demand-side programmes.
Undertake legal and economic impact assessments before implementing material new charges or restrictions, and provide reasonable transition periods where customers have made investments under existing rules.
Review the policy after implementation using published measures of affordability, reliability, investment, competition, employment and the total cost of dependable electricity.
Appendix A: Key principles for implementation
Technology neutrality: assess all generation and flexibility options on comparable evidence and the services they provide.
Cost causation: charges should reflect costs caused or services reserved, not political preferences or incumbent protection.
Efficient cost recovery: allow recovery of prudent costs and reasonable returns, not automatic pass-through of inefficiency.
Transparency: show the components of bills, levies, subsidies and network charges in understandable form.
Consumer choice: permit suppliers, tariffs and technologies to compete where network and safety conditions allow.
Reliability and safety: treat firm supply, backup capacity, safe isolation and system services as measurable services with clear responsibilities.
Fiscal clarity: make any public-policy subsidy explicit, funded and subject to review.
Regulatory certainty: publish methodologies, timetables, assumptions and reasons, and apply rules consistently.
Proportionality: tailor compliance requirements to actual risk and scale, and avoid unnecessary barriers for smaller participants.
Accountability: measure outcomes and adjust policy where evidence shows that costs, prices or reliability are moving in the wrong direction.
The references below distinguish authored commentary, political opinion and independently compiled statistics. Opinion articles are cited for their reasoning, not as independent verification of quantitative claims.
Appendix B: Selected supporting references
These references provide comparative background and international examples. They do not replace South African statutory, tariff or engineering requirements.
[R1] International Energy Agency (2026), Electricity 2026. https://www.iea.org/reports/electricity-2026
[R2] US Department of Energy, Evaluating Your Utility Rate Options. https://www.energy.gov/cmei/femp/evaluating-your-utility-rate-options
[R3] US Federal Energy Regulatory Commission (2020), Order No. 2222 Fact Sheet: Participation of Distributed Energy Resource Aggregations in Markets Operated by Regional Transmission Organizations and Independent System Operators. https://www.ferc.gov/media/ferc-order-no-2222-fact-sheet
[R4] US Department of Energy, Microgrid Systems. https://www.energy.gov/oe/microgrid-systems
[R5] World Bank, Boosting Access to Electricity in Africa through Innovation, Better Regulation. https://www.worldbank.org/en/region/afr/publication/boosting-access-to-electricity-through-innovation-better-regulation
[R6] International Energy Agency, Financing Electricity Access in Africa, Executive Summary. https://www.iea.org/reports/financing-electricity-access-in-africa/executive-summary
[R7] US Department of Energy, Electricity Transmission: A Primer. https://www.energy.gov/oe/downloads/electricity-transmission-primer
[R8] International Energy Agency (2026), Modernising Grids in the Age of Electricity. https://www.iea.org/reports/modernising-grids-in-the-age-of-electricity
[R9] Kelvin Kemm (2025), “What is Technology”, Watts Up With That? https://wattsupwiththat.com/2025/12/27/what-is-technology/
[R10] Kelvin Kemm (2026), “Comparing beer and electricity”, CFACT. https://www.cfact.org/2026/03/26/comparing-beer-and-electricity/
[R11] “Beer, avocadoes and electricity”, ESI Africa. https://www.esi-africa.com/southern-africa/beer-avocadoes-and-electricity/ (provided reference; full text not independently verified)
[R12] Kelvin Kemm (2026), “Build power stations to protect the environment”, Watts Up With That? https://wattsupwiththat.com/2026/10/10/build-power-stations-to-protect-the-environment/
[R13] Eurostat, Household electricity prices (nrg_pc_204), 2025 first half, band DC, all taxes included. https://ec.europa.eu/eurostat/databrowser/view/nrg_pc_204/default/table
[R14] Ember (2026), France country electricity profile (2025 generation). https://ember-energy.org/countries-and-regions/france/
[R15] Ember (2026), Germany country electricity profile (2025 generation). https://ember-energy.org/countries-and-regions/germany/
[R16] The Economist, “An interview with Alice Weidel”, October 2026; quotation cross-checked against a published podcast transcript. https://muckrack.com/podcast/the-intelligence-from-the-economist/episodes/4002824-an-interview-with-alice-weidel/
[R17] Ember electricity data explorer (monthly carbon intensity, methodology and country comparisons). https://ember-energy.org/data/electricity-data-explorer/
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