Big changes coming to the price of electricity for Eskom customers

Electricity prices in South Africa are set for a major shake-up as Electricity and Energy Minister Kgosientsho Ramokgopa pushes forward with plans to reform the country’s electricity pricing policy.

His goal is to make electricity more affordable, especially for the poor, and to end years of unsustainable price hikes that have burdened consumers.

Ramokgopa has acknowledged that while resolving Eskom’s generation issues and eliminating load-shedding is crucial, the next major challenge will be electricity pricing.

Over the past decade, tariffs have risen by more than 300%, with no clear link to an improvement in Eskom’s ability to provide reliable and affordable power.

Despite these increases, the power utility has continued to struggle financially, leaving many South Africans questioning the justification for such steep hikes.

One of the key concerns is the recent approval by the National Energy Regulator of South Africa (Nersa) of a 12.7% tariff increase for the 2025/26 financial year.

Eskom initially applied for a massive 36.15% increase, but Nersa significantly scaled this back.

Despite this, the approved increase means that electricity tariffs will have risen by 26.09% over three years.

In some cases, variable prices will climb by up to 25%, and fixed charges are set to increase even more steeply, raising concerns about affordability for households and businesses alike.

Ramokgopa has been vocal about the need to change the way electricity tariffs are determined.

He has criticised Nersa’s current approach, which allows for tariff hikes without adequately addressing how to protect the poor from these increases.

The government has acknowledged the need for a policy review, and Ramokgopa has taken on the task of developing a more equitable system.

The minister’s comments follow remarks from Eskom board chair Mteto Nyati, who has indicated that the era of massive, inflation-beating tariff hikes could be coming to an end.

Nyati recently stated that Eskom expects future tariff increases to be more in line with inflation, signalling a shift in the power utility’s pricing strategy.

“We are now operating under a new reality,” Nyati said in a briefing to Parliament. He noted the growing public demand for more predictable and manageable electricity pricing, particularly as the financial strain on households continues to mount.

A key factor influencing this shift is South Africa’s evolving energy landscape, where renewable energy sources such as solar and wind are playing an increasingly important role.

The cost of generating electricity from solar photovoltaic (PV) and wind energy has dropped significantly in recent years.

While residential customers currently pay around R2.49 per kWh for electricity, some solar PV projects have achieved costs as low as 56 cents per kWh, with onshore wind projects coming in at approximately 62 cents per kWh.

These developments make it increasingly difficult to justify ongoing steep tariff hikes, particularly as the transition to renewables gains momentum.

How Eskom will contain tariffs

A critical component of the plan to stabilise electricity prices is the Eskom Financial Recovery Plan.

According to Ramokgopa, this initiative is designed to strengthen the utility’s financial position by reducing its massive debt burden through government-backed interventions and improved operational efficiencies.

Decades of mismanagement, corruption, and inefficiencies have left Eskom struggling under significant debt, making it difficult to secure funding at competitive rates.

The recovery plan aims to restore Eskom’s credibility in the market by addressing these financial challenges, allowing it to access funding at lower interest rates.

This, in turn, will help contain tariff increases, ensuring that electricity remains affordable for consumers, said Ramokgopa.

The shift in pricing policy, along with financial restructuring, is expected to create a more sustainable electricity supply system.

With Eskom moving towards cost-reflective tariffs that align with inflation and the declining cost of renewables, South Africans could see a more stable and predictable electricity pricing environment in the coming years.