Government has proposed new electricity pricing measures aimed at reducing costs, protecting vulnerable households and providing businesses with greater certainty over future electricity prices.
The measures form part of South Africa’s Revised Electricity Pricing Policy, which Cabinet approved for public comment last month.
The proposed policy replaces the 2008 Electricity Pricing Policy and responds to changes in the electricity sector, including the unbundling of Eskom, the introduction of new electricity generators and reforms under the Electricity Regulation Amendment Act of 2024.
Minister of Electricity and Energy Dr Kgosientsho Ramokgopa said electricity tariffs had increased by approximately 977% since 2007, creating the need to reconsider how electricity prices are determined.
“Over a period stretching back to 2007, electricity tariffs have increased by about 977%. A number of things have changed since that period, and that is a trigger as to why we are presenting this set of proposals before you,” Ramokgopa said.
One of the proposed changes would require the National Energy Regulator of South Africa (NERSA) to publish a 10-year electricity price forecast.
The measure is intended to provide households, businesses and investors with greater visibility of the expected electricity price path.
Ramokgopa said longer-term certainty was particularly important for energy-intensive industries considering major investments in South Africa.
“If electricity is a big part of the input cost, you need to have an appreciation of what the price path looks like,” he said.
The revised policy would also establish a framework for transparent and cost-reflective tariffs and seek to prevent unrelated or hidden costs from being incorporated into electricity prices.
Once adopted, it will guide NERSA, Eskom, municipalities and other participants in the electricity sector.
The policy also reflects South Africa’s transition towards a more competitive electricity market.
Government reforms are allowing new generators to enter the market and enabling electricity producers and customers to conclude bilateral agreements outside the traditional Eskom supply model.
Ramokgopa said the country was moving towards a wholesale electricity market, requiring pricing rules that accommodate a wider range of generators and electricity customers.
The proposed changes also address the impact of unpaid electricity debt on consumers who do pay their accounts.
According to Ramokgopa, between 1% and 2.5% of current tariffs can be linked to Eskom being unable to recover money owed to it, while municipalities can similarly factor unpaid accounts into their cost structures.
Under the proposed policy, these costs would no longer be passed on to paying consumers through electricity tariffs.
Government also plans to strengthen enforcement against non-payment and illegal electricity connections while requiring electricity providers to improve operational efficiency.
Another significant proposal focuses on improving access to free basic electricity for qualifying households.
Government plans to establish a central, nationally accessible free basic electricity database and integrate it with existing Home Affairs and social grant information.
Ramokgopa said this could improve the identification of households that qualify for assistance.
“With the new age of technology, we’re able to have that database in place,” he said.
“There’s a good chance that someone who qualifies for the social grant will also qualify for free basic electricity.”
The policy also proposes changes to Negotiated Pricing Agreements for electricity-intensive industries.
Currently, these arrangements are primarily available to businesses experiencing financial distress. Government wants to expand the criteria to include industries capable of contributing to priority economic sectors, investment and employment if they receive more favourable electricity pricing.
Ramokgopa described the measure as a way of supporting economic growth before strategically important businesses reach financial distress.
The Revised Electricity Pricing Policy therefore brings together household protection, industrial support, greater competition, tariff transparency and longer-term price certainty as South Africa restructures its electricity market.
The proposals remain subject to public comment before the revised policy is finalised.
The policy’s success will depend on whether its promise of lower, fairer electricity costs is matched by transparent implementation and measurable relief for paying households and strategic industries.
