Government Outlines Plan to Lower Electricity Costs and Bring Certainty to Power Pricing
Government has outlined a new plan aimed at reducing South Africa’s high electricity costs while still ensuring that tariffs remain fair, transparent and financially sustainable. According to SAnews, the measures are contained in South Africa’s Revised Electricity Pricing Policy, which Cabinet approved for public comment last month. The policy updates the 2008 Electricity Pricing Policy and responds to major changes in the electricity sector, including Eskom’s restructuring, the introduction of new generators and the implementation of the Electricity Regulation Amendment Act, 2024.
Electricity and Energy Minister Dr Kgosientsho Ramokgopa said the country can no longer ignore the sharp increase in electricity tariffs over the past two decades. He noted that electricity tariffs have risen by about 977% since 2007, a level of escalation that has placed pressure on households, municipalities, businesses and energy-intensive industries. The revised policy is therefore intended to create a clearer and more disciplined pricing framework that lowers unnecessary cost burdens while protecting the long-term stability of the electricity system.
The policy seeks to establish national principles for electricity pricing and provide tariff-path certainty for the next decade. One of the key proposals is that the National Energy Regulator of South Africa must publish a 10-year electricity price forecast. Ramokgopa said this would help investors, particularly in energy-intensive sectors, understand what electricity costs may look like over time. For industries such as mining, manufacturing, chemicals and agriculture, electricity is often one of the largest input costs, and long-term price certainty can influence whether companies expand, invest or delay projects.
The revised policy also aims to make electricity tariffs more transparent and cost-reflective. This means consumers should be able to see more clearly what they are paying for, while hidden or inefficient costs should not be buried inside the tariff structure. Government wants a system where prices reflect the real cost of supplying electricity, but where those costs are efficient, justified and properly regulated. In practical terms, this could reduce the risk of consumers paying for poor planning, weak collection systems, municipal debt problems or inefficiencies that should be addressed elsewhere.
A major part of the reform is the opening of the electricity market to greater competition. Government is moving away from an Eskom-dominated system by allowing new generators and bilateral agreements between power producers and electricity off-takers. This means a generator may be able to sell electricity directly to a buyer under agreed terms, outside the traditional model where Eskom was the central supplier. Ramokgopa said the policy must create rules for this new environment as South Africa moves toward a wholesale electricity market.
The shift toward competition could become one of the most important drivers of lower electricity costs over time. When more generators enter the market, buyers may have access to more supply options, and pricing could become more competitive. However, the transition must be carefully managed because electricity is not an ordinary commodity. The grid must remain stable, supply must be reliable and rules must protect consumers from unfair pricing or market abuse. The revised policy is therefore meant to guide NERSA, Eskom, municipalities and new market participants through this changing system.
Government has also made it clear that lower electricity costs must not come at the expense of vulnerable households. The policy strengthens social protection for poor, indigent and vulnerable communities by setting out how support should be provided more comprehensively. This is important because electricity affordability affects daily life in very direct ways. Families need power for lighting, cooking, studying, refrigeration, communication and safety. If tariffs rise too steeply, the poorest households are often forced to reduce usage, rely on unsafe alternatives or fall into arrears.
Ramokgopa also highlighted the problem of municipal debt and its effect on electricity pricing. He explained that Eskom debt grows when consumers do not pay municipalities and municipalities then fail to pay Eskom. Under the current tariff structure, some of this unrecovered debt can place additional pressure on paying customers. The Minister said that between 1% and 2.5% of the tariff paid by consumers can be linked to Eskom’s inability to recover money owed to it. The revised policy seeks to prevent diligent consumers from carrying costs created by non-payment and poor financial management elsewhere in the system.
This proposal is likely to be closely watched by municipalities, businesses and households because municipal electricity revenue is deeply connected to local government finances. Many municipalities rely on electricity sales to support service delivery, but they also face rising debt, illegal connections, electricity theft, weak billing systems and non-payment. A fairer pricing model will therefore need to be paired with stronger municipal governance, accurate billing, improved revenue collection and consequences for institutions that fail to meet their obligations.
The revised pricing policy also supports South Africa’s wider electricity reform agenda. Eskom’s unbundling, the development of a transmission system operator, new private generation projects and changes to electricity legislation are all designed to build a more reliable and competitive electricity sector. Pricing reform is a critical part of that process because even a better supply system can fail consumers if tariffs are unpredictable, unaffordable or poorly structured. A modern electricity market needs transparent rules that balance investment, affordability and accountability.
