Good news about electricity prices in South Africa

Electricity and Energy Minister Kgosientsho Ramokgopa says further enabling third-party electricity wheeling through revised regulations is the most consequential intervention the current administration has made in the energy sector.

During a media briefing on Tuesday, 6 May 2025, the minister also said the new rules increase competition in the energy sector, resulting in lower pricing.

“I think it’s going to help us remake the energy and electricity landscape in the country,” Ramokgopa said.

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 to see electricity prices drop if the system is designed optimally.

At the very least, it will result in lower annual electricity tariff increases from Eskom.

It will also force Eskom to become more efficient to prevent its customers from migrating to producers that provide a more efficient and cheaper electricity supply.

The state-owned power utility will be compelled to invest in its infrastructure and reduce the cost of electricity.

Ramokgopa said the National Energy Regulator of South Africa (Nersa) initiated the process of revising third-party wheeling regulations through public consultation in 2012.

“Wheeling agreements that we currently have in the country are in excess of 100,” he said.

“Wheeling has been happening in the country for the last 15 years, and this is just an enhancement of the wheeling arrangements to now include wheeling into municipalities.”

Ramokgopa likened it to determining the prices of toll gates that vehicles must pass through before reaching their freeway offramp.

In addition to aligning with the goal of achieving energy security in South Africa, Ramokgopa said the revised wheeling policy enables the private sector to contribute to reducing the country’s greenhouse gas emissions.

He warned that failing to reduce greenhouse gases could result in many South African exports losing market access in the European Union, which would significantly adversely impact the country’s economy.

Anticipated challenges

During the briefing, Ramokgopa highlighted several challenges that could arise regarding third-party wheeling into and out of municipalities.

Some municipalities may not be able to complete the cost of supply studies required to unbundle and determine tariffs for distribution and reticulation fees.

He also warned that existing bundled billing systems in municipalities could need upgrading to transact under the new framework.

The minister said municipalities with debt owed to Eskom cannot participate in third-party wheeling.

“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,” Ramokgopa said.

He also highlighted the issue of limited grid capacity in resource-rich areas like the Northern Cape, which he said could hamper the government’s ambitions.

However, the minister added that efforts to expand South Africa’s transmission grid continue in parallel.

Krutham managing director Peter Attard Montalto recently warned that Eskom’s transmission grid expansion project was progressing too slowly.

Of the roughly 2,500km of transmission lines required to be built each year, the state-owned power utility can only build around 300km per year.

“The model it has chosen, which is to internally manage everything and fund everything of its own balance sheet, is simply not going to hit that pace,” he said.

“We’re going to need new models. We’re going to need the private sector doing independent transmission power projects. That’s how you roll out grids very quickly.”