South Africa has new electricity pricing rules after 18 years: what it gets right and wrong

Source: The Conversation – Africa

The South African government has released a new electricity pricing policy for the first time in 18 years. The policy sets rules that the national energy regulator, the state-owned electricity utility Eskom and municipalities must follow when working out electricity prices.

The policy explains which costs can be recovered from customers and how these charges should appear on electricity bills. Its aim is to ensure that prices are fair and clear, while bringing in enough money to maintain the electricity system and support poor households.

It also updates the pricing rules to reflect major changes since the last policy was released in 2008. Recent changes include the entry of private power producers and the addition of large amounts of rooftop solar power by businesses, farms and households since 2022.

The new policy explains how households and businesses with solar should contribute to maintaining the national grid. It also aims to prevent certain costs, such as unpaid bills and electricity that is stolen or lost through faulty infrastructure, from simply being added to electricity price increases.

I research electricity governance, administrative law, constitutional accountability and the right to electricity. I argue that there are some things the new electricity pricing policy gets right, and some it doesn’t.

About 10 million poor households in South Africa are entitled to a limited amount of free electricity each month. The minister of electricity and energy recently proposed giving these households substantially more free electricity.

But the new electricity pricing policy does not include this proposal. A separate policy governs free electricity for poor households. The two policies are not clearly linked. This means it is unclear who will pay for the extra free electricity or how it will be protected when tariffs are set.

It is my view that the government needs to update both policies together. It must explain how the increased free electricity will be funded, how it will fit into the new tariff system and how municipalities and Eskom will ensure that every qualifying household actually receives it.

The new pricing policy’s weakness

When free basic electricity was introduced in 2003, impoverished households received 50kWh per month. This was a basic survival amount, enough for lights and very limited use of a kettle, iron, television and radio.

Households need at least five times more electricity to improve their living conditions.

However, the new draft pricing policy does not guarantee poor households more free electricity. It says two government departments and the National Treasury must decide each year how much they should receive. The amount will depend on regular reviews and available funding. The government must also study the effects of the allocation over two years. Therefore, the draft creates a process for considering an increase, but does not promise one.

This is a concern because many qualifying households already do not receive free electricity, in part because local municipalities don’t keep accurate registers of families who qualify. Other reasons are poor communication, and a complicated claiming process. Eskom estimates that 10 million households may qualify, but only about 2 million receive the benefit. Increasing the amount on paper will make little difference unless the government guarantees it and ensures that all qualifying households can access it.

What the policy gets right

The draft electricity pricing policy recognises that Eskom is no longer the country’s only major electricity producer. Private companies have entered the market, and different organisations are increasingly responsible for generating, transmitting and distributing electricity.

Therefore, the draft policy seeks to ensure that paying customers are not made to pay for other people’s unpaid bills and for other losses caused elsewhere in the electricity system. This could make electricity prices fairer.

The draft also responds to a problem identified in my own research about households and businesses moving off-grid. Electricity sales help municipalities to fund other services. Therefore, when customers with solar panels buy fewer units but still use the grid for backup, some costs can shift to poorer customers who remain fully dependent on the grid.

Eskom now faces a tariff-and-sales trap

As South Africa’s state-owned electricity utility, Eskom is responsible for generating, transmitting and selling electricity. It earns most of its revenue from tariffs paid by municipalities, businesses and other electricity customers.

From 1 April 2026, direct Eskom customers faced an average tariff increase of 8.76%. Eskom’s bulk tariffs to municipalities rose by an average of 9.01% from 1 July 2026. The national energy regulator has also approved an average increase of 8.83% from April 2027. These increases are lower than the 12.74% increase in the previous year. But they are still difficult for households and businesses whose incomes are not rising at the same pace.

In the last two decades, electricity prices shot up by 1,172%, compared with 174% inflation.
In 2025 alone, tariffs rose by 12.74%, while inflation was 3.79%.

Electricity sales fell by 6.2% in 2026. Eskom said this was because of “weak industrial demand and the effects of embedded self-generation”.

These figures do not mean that Eskom is about to collapse, given that it turned a profit of more than R30 billion (about US$1.88 billion). In fact, Eskom achieved this growth even though it was owed billions by municipalities. This prompted questions about whether Eskom was funding its profitability by increasing prices.

Eskom is also spending more money. Its staff numbers rose from 42,030 employees to 43,274 in the year to March 2026. Its employee benefit costs rose by 11% to R50.4 billion (about US$3.16 billion). In its annual results presentation, Eskom said the new hiring was intended to rebuild critical skills and support its operational recovery. The utility noted that it had suffered from years of skills drain and needed more human capital to address chronic plant breakdowns and restore stability to the power grid.

Eskom pays its permanent employees from the money it collects through electricity tariffs. Therefore, it should disclose what new jobs were created and why, whether it spent less on contractors as a result, whether staff became more productive, and whether bonuses were awarded for improvements that lasted. Cutting too many jobs could undermine maintenance and lead to more power cuts. However, allowing staff numbers to grow without proper scrutiny could leave customers paying permanently higher electricity prices.

What needs to happen next

I have previously argued that access to electricity is a human right, and that prices cannot be legitimate when the cost-of-supply studies behind them are hidden.

To protect poor households, the final policy should guarantee them a minimum amount of free electricity nationwide, or set out how this minimum will be introduced over time.

It should require all municipalities to use a national database, apply the same rules when deciding who qualifies, and provide a simple way to appeal if someone is wrongly excluded.

It should also explain exactly how the free electricity will be paid for and ensure that municipalities cannot spend this money on anything else.

Felix Dube does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Original source: https://analysis1.mil-osi.com/2026/09/08/south-africa-has-new-electricity-pricing-rules-after-18-years-what-it-gets-right-and-wrong/