There were relatively high expectations ahead of the publication of the revised electricity pricing policy. Partly because the Minister had flagged it as a key document, but mostly because tariff hikes of more than 900% since 2007 have created broad-based affordability pressures, in some cases existential ones.

The policy is important for setting the framework for long-term sustainability, but on the affordability front many of its remedies are palliative; balms that come in the form of subsidies, with the policy defining who should be eligible and whether the consumer or the taxpayer pays.

As with the prevailing policy, the latest draft reaffirms that poor households should receive support, and offers a proposal for doing so through a reform of the existing free basic electricity (FBE) monthly allowance of 50 kWh.

The FBE policy has been in place since the early 2000s, but its impact has been muted, because municipalities have been unable to maintain credible indigent-household registers. The R21-billion budgeted yearly is, thus, bypassing millions of intended beneficiaries and used by municipalities as supplementary income.

The draft policy proposes increasing the size of the monthly allowance to between 200 kWh and 300 kWh but insists that this can be delivered within the existing budgetary envelope – an ambition that revolves around the perceived administration efficiencies that will flow from the centralisation of the indigent register and by deploying microgrids rather than extending the grid to under-served areas.

The policy also endorses another subsidy that has been in the system for some time: the Negotiated Pricing Agreements (NPAs) extended to electricity-dependent industries. These NPAs have always been murky affairs, despite the fact that the regulator allows the public to comment when adjudicating approvals.

The draft policy is promising a standardised and transparent framework. However, this goes against the grain of the most recent ferrochrome approval which was non-standard in its architecture and where key questions around its rationale were left unanswered.

What the policy cannot remedy are the fundamental drivers of pricing, which are also set to evolve slowly from administered tariffs to market-based prices. It also cannot cure other policy and regulatory ills that directly contradict the affordability goal.

Here, the latest Integrated Resource Plan springs to mind, given how it has forced in higher-cost technologies such as nuclear, while facilitating the introduction of gas-to-power at capacity factors that are far higher than that which will be needed for electricity security.

There are also the decisions currently before the regulator that can either facilitate or dampen the competitive pressures needed to, at the very least, decelerate the rate at which prices will rise. There is a genuine risk that these rules will instead be bent to the will of the financially distressed incumbent.

Then, there is the resistance to the structural reforms that can facilitate the investment required for a future supply/demand balance that favours more competitive pricing.

The pricing policy becomes fully relevant only if these affordability fundamentals are also in place.