Traditionally, electricity tariffs have been designed to recover the total cost of electricity supply through a combination of fixed monthly charges ($/month), volumetric energy charges ($/kWh) and, for some customers, capacity charges ($/kW). More advanced structures also differentiate charges by season, day, or hour. These costs are allocated across tariff components using cost-causality principles, within the capabilities of available metering systems.
The growing presence of distributed energy resources (DERs) requires a broader approach. Customers with DERs can both consume and provide electricity services with economic value. Tariff design must therefore account for the services each system user receives and provides, ensuring appropriate charges and remuneration while maintaining overall cost recovery. Costs that cannot be attributed to energy consumption or capacity requirements are recovered through a fixed residual charge.
Prepared by the African School of Regulation (ASR) through a collaborative research project with Sustainable Energy Africa (SEA), this report presents an analytical framework for rate design in the presence of distributed generation in Africa. It examines four key electricity services energy, networks, operating reserves, and firm generation capacity and distinguishes between market prices and regulated charges. The framework supports the allocation of costs and remuneration across tariff components as African electricity systems integrate increasing levels of distributed generation.
