South Africa Proposes 10-Year Electricity Price Forecast

South Africa's power market is opening to more generators, allowing producers and customers to enter bilateral electricity supply agreements outside the traditional Eskom model.

South Africa is proposing a major overhaul of its electricity pricing rules, including a 10-year price forecast, stronger protection for low-income households and new support for energy-intensive industries as the country tries to tackle power costs that have risen sharply since 2007.

The Revised Electricity Pricing Policy, approved by Cabinet for public comment last month, will replace the 2008 policy and reshape tariff rules around an electricity industry that is becoming more competitive as Eskom is unbundled and private generators take a larger role.

Electricity and Energy Minister Kgosientsho Ramokgopa said tariffs have increased by about 977% since 2007, making affordability a central concern for households and businesses. The proposed policy still requires tariffs to reflect the genuine cost of supplying electricity, but it seeks to prevent inefficient costs and unpaid debt from simply being passed on to customers who pay their bills.

NERSA to publish 10-year electricity outlook

The biggest proposed change is a requirement for the National Energy Regulator of South Africa to publish a 10-year electricity price forecast, giving households and businesses a clearer view of how power costs could develop.

Long-term visibility is particularly important for heavy industry, where electricity can account for a significant portion of production costs. Companies considering factories, mines or other energy-intensive investments need to estimate future operating expenses before deciding whether a project can generate an acceptable return.

The policy is also designed to make tariff calculations more transparent by ensuring prices reflect legitimate costs rather than allowing unrelated expenses or inefficiencies to become hidden within electricity bills.

Once adopted, the framework will guide NERSA, Eskom, municipalities and other participants as the country's electricity system moves away from its traditional structure.

Competitive electricity market changes pricing rules

South Africa's power market is opening to more generators, allowing producers and customers to enter bilateral electricity supply agreements outside the traditional Eskom model.

That change requires new rules because the electricity system is no longer built around a single dominant generator supplying power through municipalities and other established channels. The country is also moving towards a wholesale electricity market where generators can compete to supply customers.

The revised pricing policy is intended to provide common principles for this changing market while maintaining accountability around the costs consumers ultimately pay.

Ramokgopa said electricity providers will also face greater pressure to operate efficiently, arguing that better performance throughout the supply chain should help bring costs under greater control.

Unpaid municipal debt will not fall on paying customers

The Government wants to change the way unpaid electricity debt affects tariffs. Municipalities can struggle to pay Eskom when consumers fail to settle their municipal electricity accounts, creating debt that eventually feeds back into the wider electricity system.

Ramokgopa said between 1% and 2.5% of current tariffs can effectively reflect money Eskom is unable to recover, placing additional pressure on customers who consistently pay for electricity.

The revised policy would prevent such costs from automatically being pushed onto diligent consumers, while allowing stronger action against non-paying customers and illegal electricity connections.

Social protection will remain part of the pricing framework, particularly for poor, indigent and vulnerable households that cannot afford the full cost of electricity.

Free electricity system set for digital overhaul

Government plans to modernise the administration of free basic electricity by establishing a nationally accessible central database for eligible households. The proposed system could connect electricity support records with existing Home Affairs and social grant databases, making it easier to identify households that qualify and reducing the risk that eligible families miss out because of fragmented municipal records.

The policy also expands the role of Negotiated Pricing Agreements for electricity-intensive industries. Such arrangements have traditionally focused on businesses already experiencing financial distress, but the proposed rules would allow support in cases where lower electricity costs could advance broader national economic priorities.

Industries capable of expanding production, creating employment or supporting priority sectors could potentially qualify even before reaching financial distress, turning electricity pricing into a tool for encouraging investment rather than waiting for businesses to face closure or contraction.

The proposed framework therefore combines affordability, industrial policy and market reform within a single pricing approach. Its success will depend on whether South Africa can make electricity suppliers more efficient, protect vulnerable households and create genuine competition while keeping tariffs closely tied to the real cost of delivering power.