South Africa Overhauls 18-Year-Old Power Tariff Rules; Regulator Faces New Accountability

South Africa’s electricity pricing framework, unchanged since 2008, has been overhauled for the first time in 18 years, placing new obligations on the national energy regulator, Eskom, and municipalities in how they calculate tariffs and recover costs from customers.

The regulatory update arrives as the country’s energy landscape has shifted substantially. Private power producers have entered the market, and distributed solar generation from businesses, farms and households has expanded considerably since 2022. The new framework sets out how these participants must contribute to maintaining the national grid. It also attempts to prevent specific costs, including unpaid bills and electricity losses from theft or faulty infrastructure, from being absorbed into general price increases for all consumers.

Additional reference context is available at https://theconversation.com/south-africa-has-new-electricity-pricing-rules-after-18-years-what-it-gets-right-and-wrong-291214.

The policy pursues three objectives simultaneously: fair and transparent pricing, sufficient revenue to sustain the electricity system, and protection of poor households from unaffordable tariffs. That third objective is where the framework is weakest.

About 10 million South African households qualify for free basic electricity. Only approximately 2 million currently receive it. When the free basic electricity program was introduced in 2003, qualifying families received 50 kilowatt-hours per month, enough for lights and minimal appliance use. Research indicates households need at least five times that amount to improve living conditions meaningfully.

The minister of electricity and energy has proposed substantially increasing free electricity for poor households. That proposal does not appear in the new pricing policy. A separate policy governs free basic electricity, and the two frameworks are not clearly linked. What the draft pricing policy establishes instead is a process requiring two government departments and the National Treasury to decide annually how much free electricity should be provided, with the amount subject to regular reviews and available funding. The government must also study the effects over two years before committing to any increase.

This approach creates real uncertainty. Many qualifying households already do not receive the free electricity they are entitled to, partly because local municipalities fail to maintain accurate registers of eligible families. Poor communication and complicated claiming processes compound the problem. Without a firm guarantee and a clear funding mechanism, any increase on paper will have minimal impact unless the government ensures all qualifying households can actually access it.

Meanwhile, the policy does address legitimate concerns about cost distribution. Eskom is no longer the country’s sole major electricity producer, and responsibility for generating, transmitting and distributing power is now fragmented across multiple organisations. The framework seeks to prevent paying customers from subsidising unpaid bills or losses occurring elsewhere in the system, a change that could make tariffs fairer across the board.

The policy also responds to a growing structural problem. As customers with rooftop solar panels reduce their grid purchases while still relying on the network for backup power, some costs shift to poorer households that remain fully dependent on the grid. The new framework attempts to ensure solar users contribute appropriately to grid maintenance costs.

Eskom itself faces mounting financial pressure. From April 1, 2026, direct Eskom customers faced an average tariff increase of 8.76 percent. The utility’s bulk tariffs to municipalities rose 9.01 percent from July 1, 2026, and the national energy regulator approved an average increase of 8.83 percent from April 2027. These increases, while lower than the previous year’s 12.74 percent rise, remain difficult for households and businesses whose incomes are not rising proportionally.

The cumulative picture is stark. Over the past two decades, electricity prices have increased by 1,172 percent compared with 174 percent inflation. In 2025 alone, tariffs rose 12.74 percent while inflation was 3.79 percent. Electricity sales fell 6.2 percent in 2026, which Eskom attributed to weak industrial demand and the effects of embedded self-generation from distributed solar.

Despite these pressures, Eskom reported a profit exceeding R30 billion (approximately US$1.88 billion), even as municipalities owed the utility billions. That figure raises a direct accountability question: whether the utility is funding profitability through price increases rather than operational efficiency.

Staff numbers also grew, from 42,030 to 43,274 employees in the year ending March 2026, with employee benefit costs rising 11 percent to R50.4 billion (approximately US$3.16 billion). Eskom stated the hiring was intended to rebuild critical skills and support operational recovery after years of skills drain and chronic plant breakdowns. Because Eskom funds its payroll through electricity tariffs, greater transparency is required. The utility should disclose what positions were created and why, whether contractor spending decreased, whether productivity improved, and whether bonuses were awarded for sustained performance gains.

For the policy to protect poor households effectively, the final version should guarantee a minimum amount of free electricity nationwide, or set a firm timeline for introduction. It should require all municipalities to use a national database, apply uniform eligibility rules, and provide simple appeal mechanisms. Critically, it must explain precisely how free electricity will be funded and prevent municipalities from redirecting those resources elsewhere.

Whether the government will tighten those commitments before the policy is finalised remains the central accountability question the framework has yet to answer.