Bad news for businesses in South Africa’s biggest cities

South Africa’s revised regulations surrounding third-party electricity wheeling into and from municipal networks stipulate that those in debt with Eskom cannot participate.

Major municipalities like the City of Johannesburg and the City of Tshwane owe significant amounts to the state-owned power utility, so businesses in these regions cannot benefit from third-party wheeling.

Tshwane’s debt to Eskom currently sits at around R5.7 billion. At the same time, Johannesburg power utility City Power owed Eskom R4.9 billion in historic debt and a further R1.4 billion in its current account, as of November 2024.

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

However, he noted that 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,” the minister stated.

Therefore, businesses and independent power producers (IPPs) in Johannesburg and Tshwane won’t benefit from the system until the municipal debt to Eskom is paid or another arrangement is made.

Speaking to 702, energy expert Professor Vally Padayachee described the issue as a Catch-22 situation, attributing the requirement for Eskom debts to be paid up to a business decision.

“In any business, if you owe me money then I need to get paid. It’s no use giving you services incurring more debt and still you’re owing me money,” he said.

However, Padayachee added that a deeper discussion into the root causes of municipal debt to Eskom is required, as their non-payment unfairly compromises producers and consumers in these municipalities.

“You cannot really compromise the innocent independent power producer and the innocent customer whether he or she sits on the Eskom or municipal networks because there’s a dispute between Eskom and the municipality,” he said.

South Africans can expect electricity prices to drop

During a media briefing on the revised regulations on Tuesday, 6 May 2025, Ramokgopa said enabling third-party wheeling will increase competition in the energy sector, resulting in lower end-user pricing.

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

He added that South Africans can expect lower electricity prices if the third-party wheeling system is designed optimally, or at the very least, see lower annual electricity tariff increases from Eskom.

The heightened competition will force Eskom to improve its efficiency to prevent customers from ditching it in favour of providers with a more efficient and affordable electricity supply.

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

It should be noted that third-party wheeling has existed in South Africa for around 15 years, with the National Energy Regulator of South Africa (Nersa) initiating the process of revising regulations in 2012.

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

“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 the revisions to determining the prices of toll gates that vehicles must pass through before reaching their freeway off-ramp.

He added that not only will the move help reduce prices and align with South Africa’s goal of achieving energy security, the revised wheeling policy enables the private sector to contribute to reducing the nation’s emissions.

He warned that failing to do so could result in South African products losing market access in the European Union, which would have a significant negative impact on the economy.