Critical South African company is technically insolvent and loses money when it sells its product

City Power pays Eskom more for bulk electricity than it charges residents for its services in South Africa’s richest city, with a decade of mismanagement catching up with the utility. 

Chief commercial officer Thami Mathiso said the utility is aggressively implementing interventions to recover debts and improve revenue collection. 

This should, in time, broaden the base of payers and improve the utility’s financial standing, without it being stuck trying to recover costs from a dwindling number of customers. 

However, the significant investment in alternative energy sources, such as rooftop solar, by businesses and households threatens to leave City Power with largely non-paying, poorer customers. 

JoburgCAN manager Julia Fish told Newzroom Afrika that, despite the utility’s progress, its main problems stem from fundamental issues with the city’s tariff structure. 

“The failure is not necessarily with City Power. It comes down to the fact that tariffs are really unaffordable for most people,” Fish said. 

“The price of electricity has gone up exponentially over the past few years, and it is now inaccessible for many of the city’s inhabitants.” 

This means people are aggressively reducing their electricity use to save money or seeking alternatives, whether legitimate or not. 

As a result, City Power is having to cover increasing costs from a smaller number of customers, pushing it to raise its own prices, creating a downward spiral. 

“It is also a way of how electricity tariffs are structured within the City of Johannesburg. City Power is losing a hell of a lot of money because of this,” Fish said. 

“This is because of the way they are paying for the bulk purchase from Eskom and how that cost is passed down to the customer.” 

“For instance, during winter last year, at times, City Power was paying R6 per kWh for electricity, but only charging customers R3 per kWh.” 

As a result, while City Power may make improvements to its billing system, enhance compliance, and improve its services, there are fundamental problems beyond its control that put it in a dire financial situation.

City Power finds itself in a dire financial situation, with its liabilities exceeding its assets by R22.2 billion at the end of the 2024/25 financial year. It also posted a R4.3 billion cumulative loss over the past four quarters of operation.

This is due to the company’s expenditure being significantly higher than its revenue, which it has admitted is caused by its own inefficiencies.

Solar eating away at City Power

City Power has also been negatively affected by the responses of Johannesburg’s inhabitants to its unreliable billing system and load-shedding. 

Many households and businesses shifted to prepaid meters to eliminate uncertainty about the city’s sporadic billing. 

The main challenge for City Power comes from how wealthier households and businesses have responded to load-shedding and soaring electricity prices. 

City Power’s challenges in this regard mirror those of Eskom, which is also facing a dwindling customer base as it loses some of its best customers and as demand for alternative energy sources grows. 

“With the instability that came with load-shedding, a lot of people turned to solar and other backup technologies,” Fish said. 

“This is one of the reasons why City Power is unable to sell as much electricity as it has in the past, with businesses and residents finding alternatives.”

This leaves City Power with a shrinking customer base from which it can generate revenue to cover its costs. 

Fish explained that the only way out of this is for City Power to make its services more reliable and its electricity significantly cheaper.

This will slow the rate at which customers invest in alternative energy sources and encourage increased industrial or heavy users of electricity to benefit from cheaper input costs.

In the long run, this is likely to result in City Power collecting more revenue than it currently does from increased demand for its product.

“One of the ways for electricity to cost the city less is to reduce its reliance on Eskom, through its own energy generation or bi-directional meters for solar producers,” Fish said. 

“With a bidirectional meter, households and businesses can feed their excess back into the grid and would be encouraged to do so. This would have a massive benefit for the city.” 

This, if done on a significant scale, would require City Power to invest in battery storage to store and dispatch electricity as needed. 

Fish also said this would reward people for investing in energy generation rather than being punished for it, as they are under the current system. 

“Solar has been a saviour for City Power when it comes to reducing demand during peak times and relieving pressure on the grid,” she said. 

In the most recent financial year, City Power failed to sell around R3.4 billion worth of electricity it bought from Eskom due to poor demand in Johannesburg.

Over the past three years, City Power’s revenue shortfall from electricity sales was roughly R9.2 billion.