Cabinet Approves Decade-Long Electricity Pricing Framework for South Africa
South Africa’s Cabinet has approved a revised electricity pricing policy designed to establish regulatory certainty and guide tariff-setting across the country’s power sector for the next decade. The policy, now open for public comment, represents a substantial update to the 2008 Electricity Pricing Policy and responds to structural changes in how electricity is generated, distributed and sold.
Electricity tariffs have risen approximately 977 percent since 2007, Minister Ramokgopa told media in Pretoria on Tuesday. That trajectory prompted the government to develop a comprehensive framework addressing both the mechanics of cost recovery and the protection of consumers unable to afford rising rates.
The National Energy Regulator of South Africa (NERSA) will be required under the new policy to publish a 10-year price forecast. This requirement aims to give heavy industries and major investors visibility into future electricity costs when evaluating long-term capital investments. For sectors dependent on electricity as a significant input cost, such forecasting is essential to calculating returns on investment, the Minister explained.
The policy establishes national principles for tariff-setting and creates a framework for transparent, cost-reflective pricing that avoids hidden costs being embedded in electricity bills. Once adopted, it will guide the work of NERSA, Eskom, municipalities and other actors operating within the electricity ecosystem.
A central element of the government’s approach involves opening the electricity market to competition. The policy reflects ongoing reforms tied to the unbundling of Eskom and implementation of the Electricity Regulation Amendment Act, 2024. Under these changes, new generators will enter the market, and bilateral arrangements will allow generators and off-takers to negotiate electricity supply agreements outside Eskom’s traditional monopoly structure. South Africa is moving toward a wholesale electricity market that extends beyond the historically Eskom-heavy and municipality-focused system.
The revised policy also introduces mechanisms to address debt accumulation within the electricity supply chain. Currently, when consumers fail to pay municipalities and municipalities fail to pay Eskom, the utility absorbs the loss and recovers it through tariffs applied to all consumers. Between 1 percent and 2.5 percent of current tariffs reflects Eskom’s inability to recover amounts owed by municipalities, placing additional financial burden on households that do pay their bills. Under the new policy, this cost-shifting is prohibited. The framework will also enable enforcement action against consumers who do not pay for electricity and those illegally connected to the grid.
By contrast, the government has committed to strengthening social protections within the new tariff structure. A modernized free basic electricity program will establish a centralized, nationally accessible database that integrates with Home Affairs records and social grant databases. This integration is intended to ensure that households qualifying for social grants are automatically identified as eligible for free basic electricity assistance.
The policy introduces a Negotiated Pricing Agreement instrument to support energy-intensive industries. Unlike the current framework, which reserves such agreements for companies in financial distress, the new approach will also extend concessional pricing to viable industries that can demonstrate they will serve the national interest by accelerating growth in priority economic sectors and creating employment. The Minister characterized this as a preventive measure to stimulate economic recovery.
The revised policy is designed to balance competing objectives: establishing cost-reflective tariffs that enable utilities to recover legitimate expenses, protecting vulnerable households from unaffordable electricity costs, and creating conditions that attract industrial investment. Providing tariff certainty over a decade and clarifying the rules governing a more competitive electricity market, the government intends to reduce the cost of electricity while maintaining the financial viability of the system.
Whether NERSA’s 10-year price forecast, once published, will be sufficient to shift investor confidence in a market long shaped by Eskom’s dominance remains the open question at the center of this reform.