Eskom Threatens Power Supply Cuts to Johannesburg Over R5.2 Billion Debt

According to Eskom, the current outstanding amount does not yet include an additional R1.5 billion payment that is expected to become due in June.

South Africa's power utility Eskom has issued a formal notice of intent to reduce, interrupt or terminate electricity supply to certain bulk supply points in the City of Johannesburg (CoJ), citing unpaid electricity debt amounting to R5.2 billion owed by the city and its municipal utility, City Power (CP).

The utility warned that the debt crisis threatens Eskom's financial sustainability and undermines efforts to maintain affordable and reliable electricity supply across the country.

According to Eskom, the current outstanding amount does not yet include an additional R1.5 billion payment that is expected to become due in June.

Eskom Says Johannesburg Failed to Honour Supply Agreement

In a strongly worded statement, Eskom said it has spent more than two years attempting to support the City of Johannesburg and City Power in meeting their payment obligations and avoiding drastic action.

"Eskom has been working with CoJ and/or CP for over two years to support the metro in meeting its payment obligations," the utility stated.

However, Eskom said repeated defaults and failure to comply with the Electricity Supply Agreement have now forced the utility to initiate steps toward possible supply interruptions.

"As a result of CoJ/CP's continued failure to honour its Electricity Supply Agreement with Eskom, including repeated defaults, Eskom has been forced to issue a notice of its intention to reduce, interrupt and/or terminate the supply of electricity to certain bulk supply points against the City of Johannesburg and City Power," Eskom said.

The announcement raises concerns about potential electricity disruptions in South Africa's economic hub if the dispute is not resolved.

Eskom Criticises Revenue Collection Failures

Eskom argued that it is unacceptable for municipalities and metros to collect revenue from electricity consumers while failing to transfer Eskom's share of the payments.

The utility emphasized that unpaid municipal debt continues to place severe pressure on its financial position.

"It cannot be acceptable to the City's residents and all South Africans that the city is failing to pay over Eskom's share of electricity revenue collected," the power utility said.

Eskom warned that escalating municipal and metro debt is undermining ongoing efforts to improve operational efficiency and stabilize electricity supply.

"While Eskom continues to focus on being cost-efficient, escalating municipal and metro arrear debt undermines these efforts," the utility explained.

Financial Sustainability Under Pressure

The utility highlighted that its long-term financial sustainability depends heavily on improving revenue collection and controlling costs.

"Eskom's financial sustainability and ability to supply electricity at affordable prices are dependent upon its ability to improve its balance sheet by increasing revenue and reducing expenses," Eskom said.

The utility added that revenue growth can only be achieved through:

• Collection of outstanding electricity debt

• Improved municipal payment compliance

• Electricity tariff adjustments where necessary

Municipal debt has become one of Eskom's major financial challenges in recent years, with several municipalities across South Africa struggling to meet payment obligations due to financial mismanagement, infrastructure issues and low revenue collection rates.

Municipal Debt Crisis Continues Nationwide

Despite the Johannesburg dispute, Eskom said several municipalities and metros across the country are actively working with the utility to develop sustainable debt repayment solutions.

"Across the country, many municipalities and metros are working with Eskom to develop sustainable debt solutions and Eskom is continuing to accelerate its support for this approach," the utility stated.

Eskom revealed that on 5 May, nine municipalities received council resolutions to sign Distribution Agency Agreements following consultation processes.

The utility believes these agreements could provide long-term solutions to electricity distribution and debt recovery challenges facing local governments.

Eskom Promotes Distribution Agency Agreement Model

As part of its broader strategy, Eskom has developed the Distribution Agency Agreement (DAA), which it describes as a long-term, non-permanent partnership between Eskom and municipalities or metros under its Active Partnering initiative.

The agreement is designed to improve the technical and financial sustainability of municipal electricity services.

"This agreement offers a suite of services and solutions aimed at restoring the sustainability of electricity provision in a municipality or metro by enhancing its technical and financial sustainability," Eskom explained.

Under the DAA model, Eskom may assist municipalities with:

• Revenue collection

• Smart meter installation and replacement

• Technical support

• Skills development and training

• Infrastructure management improvements

In some cases, Eskom could also collect electricity revenue directly on behalf of municipalities.

"The services include skill development and training, replacement or installation of smart meters, as well as Eskom collecting revenue on behalf of the municipality," the utility stated.

Concerns Over Potential Impact on Johannesburg Residents

The notice of intended electricity interruptions has raised concerns about the potential impact on Johannesburg residents, businesses and public services.

Johannesburg remains South Africa's largest metropolitan economy and a critical commercial and financial centre.

Energy analysts warn that large-scale power interruptions could affect:

• Businesses and industries

• Healthcare facilities

• Public transport systems

• Municipal services

• Economic activity

• Household electricity access

However, Eskom's notice does not immediately mean supply interruptions will occur, as discussions between the utility and the city are expected to continue.

Electricity Sector Faces Ongoing Structural Challenges

The dispute highlights broader structural and financial challenges facing South Africa's electricity sector, including:

• Municipal debt accumulation

• Aging infrastructure

• Revenue collection problems

• Energy supply constraints

• Governance and financial management issues

Experts say long-term sustainability will require stronger cooperation between Eskom, municipalities, regulators and national government institutions.

Eskom's Active Partnering initiative and Distribution Agency Agreements are increasingly being viewed as possible mechanisms to stabilize municipal electricity systems and improve financial accountability.

The outcome of negotiations between Eskom and the City of Johannesburg is likely to be closely watched as a test case for how South Africa manages growing municipal electricity debt and infrastructure sustainability challenges.