Is the South African electricity tariff model conducive to an energy efficient economy?

Energy conservation has emerged as the most prudent means of deferring capacity expansion of utility generation and power delivery infrastructure. This is particularly critical in the era of climate change coupled with erratic fuel prices and poor security of supplies. The dilemma, however, is the potential negative impact that conservation programs can have on the sustainable operation of utilities through lost revenues. For example, in South Africa the power utility Eskom recently (January 2010) requested for a 35% tariff increase (per annum for 3 years). Their stated goal was to raise capital for new power generation plant and delivery infrastructure through the sale of energy. This problem has been identified in much of the developed world particularly over the past 20 years. Various tariff models to decouple utility profitability from increased sales volumes have been proposed and legislated. Each solution, however, has advantages and shortcomings and their viability is often context dependent. In this paper a number of models that have been tried elsewhere are discussed. The author then suggests options that might be suitable for South Africa.