KEY POINTS
- Eskom requests a 36.1% price hike for 2025.
- Unemployment and slow economic growth compound the rising costs.
- Government reforms may bring more competition to the energy market.
Eskom, the state-owned energy provider in South Africa, has submitted an application to the National Energy Regulator of South Africa (NERSA) seeking approval for a 36.1% increase in electricity prices, which would begin in April 2025 and grow by 11.8% in 2026 and 9.1% in 2027.
Eskom proposes major electricity price increases over three years
According to Eskom, these hikes are required to reach a cost-reflective rate that accounts for the true expenses of providing electricity.
Significant price increases have already been adopted by Eskom in recent years, including increases of 18% in 2023 and 13% in 2024, which are far higher than the 4.4% inflation rate. Some companies and individuals are looking for alternatives, including as rooftop solar systems and self-generation, as a result of the sharp increases. Eskom’s earnings have been further impacted by the 2% decline in electricity sales. In response, municipalities—the biggest electrical distributors—have likewise increased their rates.
Consumers are forced to pay more, which exacerbates South Africa’s economic woes, where unemployment is at 33.5% and growth is only expected to be modest at 0.6% in 2023. For many South Africans, the high expense of life is made worse by rising electricity bills.
Eskom continues to be the principal provider of electricity for almost the whole nation in spite of this. Despite growing costs, consumers and companies are forced to rely on Eskom’s power since they have few other options.
Government reforms aim to open the energy market to competition
In order to connect renewable energy sources to the grid, the government is implementing reforms, such as the Electricity Regulation Amendment Act, which will establish an independent Transmission Systems Operator. Renewable energy sources would have greater competition in the market as a result, but it’s unclear if these adjustments will lower the exorbitant prices.
Although South Africa’s energy policies seek to strike a balance between cost, sustainability, and energy security, the nation is still heavily reliant on coal, with more than 78% of its electricity coming from coal-fired power plants. In 2024, Eskom would require R78 billion in government debt relief, demonstrating the company’s ongoing financial fragility.
There are continual efforts to increase energy security, and recent actions have prevented power outages for more than 200 days in a row. But providing everyone with inexpensive electricity is still quite difficult.
