Major price changes planned for people who use grid power in South Africa

Eskom wants South African households to fork out substantially more for consuming low to moderate amounts of electricity from next year, on top of massive annual tariff hikes.

The power utility recently published its 2025/2026 retail tariff plan (RTP), which was submitted to the National Energy Regulator of South Africa (Nersa) in August 2024.

Eskom has revised and submitted the RTP annually since at least 2021, proposing structural changes it said address “historical mismatches” between its cost structure and the revenue recovery from existing tariffs.

However, this is the first time Nersa has initiated a public participation process to pave the way for potentially approving the RTP.

Eskom maintains the changes are necessary to accurately reflect costs as it unbundles its functions into generation, transmission, and distribution over the coming years.

“Ultimately, the proposed tariff changes will enable Eskom to recover Nersa-approved costs and returns by aligning prices and tariff rates with the actual costs incurred,” the power utility said.

“Unbundling tariffs will ensure fair cost recovery, remove unfair subsidies, support the responsible integration of alternative energy sources and the transition to a more sustainable electricity market.

Eskom’s argument for “cost-reflective” tariffs is flawed for several reasons, including its oversized workforce by global benchmarks and many years of corruption and mismanagement that contributed to high debts and debt servicing costs.

The new tariff structure will introduce two basic changes: significantly increased fixed costs and a flat rate for electricity consumption charges.

Much of the focus has been on how the tariffs will impact grid-tied solar power users, which have substantially reduced their reliance on grid power in the past few years.

Eskom board chairman Mteto Nyati said that although many South African households and businesses claimed to be off-grid, they were “stretching the truth.”

“After a few hours of cloudy weather, they quietly reconnect to the grid as they use Eskom as supplier of last resort,” Nyati said. “That is how things should be.”

Nyati’s comment appears to suggest that the power utility approves of grid-tied users tapping into its grid every so often.

This seems to be in contrast with Eskom’s claims that solar power users who made irregular use of its grid were being subsidised by other users who consumed more electricity.

If Eskom wanted to keep things as they “should be”, it would not propose adjustments that could push many grid-tied solar power users to upgrade their systems and truly go off-grid.

Solar power users not the biggest problem with Eskom’s tariffs

In its messaging around the RTP, Eskom has skirted around the large number of non-solar users who will be heavily impacted by its changes.

Due to the increased fixed tariffs, many small to medium-sized households, including low and middle–income earners who don’t qualify for free electricity, will pay substantially more.

At the same time, larger consumers will see their bills reduced due to the scrapping of its Inclining Block Tariffs.

This reflects a dramatic change in attitude from Eskom, which had for years urged consumers to be energy-conscious.

MyBroadband previously calculated a household on Eskom’s most common direct residential tariff, Homepower 4, would need to consume 764kWh or more per month to pay less under the RTP.

In the current financial year, that usage will cost R2,793 per month, much more than many small and mid–sized middle-class households spend on electricity.

While Eskom has argued the tariffs will result in the “average” user paying less, this is based on a dubious figure of 900kWh.

Eskom has failed to answer MyBroadband’s questions about how it arrived at this number, which is highly questionable when compared to its own electricity sales figures and Statistics South Africa’s household survey data.

MyBroadband has calculated that the average consumption per household was around 185kWh to 214kWh in 2023, while solar installers have also estimated the average consumption to be between 270kWh and 450kWh.

The table below compares how Eskom’s direct residential customers’ bills would change if its RTP were adopted.

Bear in mind that these changes exclude the impact of the 36.15% and 43.65% annual tariff hikes Eskom is also seeking from Nersa for its direct and municipal customers for 2025/2026.

In addition, although the price changes below are specific to Homepower 4 customers, the RTP will also separate municipal tariffs into separate generation capacity and energy charges.

Therefore, municipal customers can expect similar changes in their bills.