Municipalities have the constitutional responsibility to provide basic services, and the equitable share allocation enables them to do so. In areas where Eskom is the supplier, the FBE is provided on behalf of municipality by Eskom. In such areas, the municipality enters into an agreement with Eskom which covers households that are in the Eskom supply areas within the municipality.
The National Energy Regulator of South Africa (NERSA) developed a methodology to determine the National Free Basic Electricity (NFBE) rate. The tool is used annually to determine the NFBE rate that Eskom charges the municipalities for supplying FBE on its behalf. The methodology was approved in May 2011, and reviewed in 2013 and 2017.
The purpose of the review is to enhance FBE regulation. Certain sections of the mechanism have been revised to align objectives and ensure that the process of determining the FBE rate is fair and transparent.
One lesson learned through the previous methodology was that some of the sections were not clear on their intended objectives, particularly on when volume forecasts made by Eskom are not met.