Eskom’s plan to punish customers in Johannesburg

Due to its debt to Eskom, Johannesburg and its residents will not be allowed to participate in South Africa’s revised regulations surrounding third-party electricity wheeling. 

During a media briefing on Tuesday, 6 May 2025, Electricity and Energy Minister Kgosientsho Ramokgopa said revised regulations would allow cities to partake in third-party electricity wheeling.

Third-party wheeling enables independent power producers (IPPs) to sell the electricity they produce directly to consumers in other parts of the country, using Eskom’s transmission infrastructure.

Enabling third-party electricity transmission will allow for multiple private generators to enter the electricity trade market and sell the energy they produce to various consumers.

Ramokgopa explained that South Africans can expect electricity prices to drop if the system is designed correctly.

“It will, at the very least, result in lower annual electricity tariff increases from Eskom. The heightened competition will force Eskom to improve its efficiency,” he said. 

“This will prevent customers from ditching it in favour of providers with a more efficient and affordable electricity supply.”

Ramokgopa said enabling third-party electricity wheeling through revised regulations is the most consequential intervention the current administration has made in the energy sector.

However, he noted that municipalities with debt owed to Eskom cannot participate in third-party wheeling.

Earlier this year, Eskom CEO Dan Marokane said the utility’s municipal debt situation is dire, rising by 33% from the previous year to an estimated R100 billion. 

Johannesburg is among the top defaulting municipalities, accounting for 58% of total arrears. 

As of November 2024, Johannesburg power utility City Power owed Eskom R4.9 billion in historic debt and R1.4 billion in its current account.

“It’s something that we are resolving with Eskom just to make it possible that if we want to achieve the full scale of this ambition, we must be able to broaden it as much as possible,” the minister stated.

Therefore, businesses and independent power producers (IPPs) in Johannesburg and Tshwane won’t benefit from the system until the municipal debt to Eskom is paid or another arrangement is made.

Why Eskom is cutting out indebted municipalities

According to Professor Vally Padayachee, an energy expert and former executive manager at Eskom, the decision not to allow indebted municipalities to participate in third-party wheeling is fundamentally a business one. 

“If you owe me money, then I need to get paid. I can’t be giving you services and carrying debt, and still you are owing me money,” he said.

In other words, Eskom is unwilling to provide access to its infrastructure, including the ability to move electricity from IPPs to end-users, to municipalities behind on their payments.

This stance has significant implications for major cities like Johannesburg, which is among the municipalities in arrears, as well as their businesses and residents. 

Wheeling, which allows private generators to sell electricity to end-users via Eskom or municipal grids, is a key tool for improving energy security and enabling economic development. 

However, because Johannesburg is not in good financial standing with Eskom, it is effectively locked out of these benefits. 

This limits the city’s ability to access alternative energy sources, even as power constraints continue to weigh heavily on residents and businesses.

Padayachee acknowledged the inherent contradiction in this approach, noting that it is an issue that the residents are the ones to lose out. 

“You cannot compromise the innocent IPP and the innocent customer, whether he or she sits on the Eskom grid or the municipal grid, because there’s a problem between Eskom and the municipality,” he said. 

However, Padayachee added that a deeper discussion into the root causes of municipal debt to Eskom is required.

He argued that some of the municipalities getting the cold shoulder would pay Eskom if they could, and part of the debt problem is the price Eskom charges. 

“The price that Eskom sells to the municipalities has gone through the roof. I’ll argue that many municipalities have become virtual resellers of Eskom,” said Padayachee.

“About 75% to 90% of their income statement goes towards the cost of sales — purchasing electrons from Eskom, which needs to change.”