Eskom chairman shares good news about electricity prices

Eskom chairman Mteto Nyati said the utility’s primary focus is now on reducing the cost of electricity for South African households and companies. 

This comes as Eskom is less than a week away from going an entire year without having to implement load-shedding, as the Generation Recovery Plan bears fruit. 

South Africa’s private sector also played a critical role in bringing load-shedding to an end through the investment of billions of rands in renewable generation capacity. 

However, the end of load-shedding has come with soaring electricity prices as Eskom looks to recover revenue from a dwindling customer base to cover its rising costs. 

A significant share of Eskom’s coal-fired power stations are nearing the end of their design lives, and this results in them requiring intensive maintenance to keep operating. 

While Eskom has managed to improve its output and reliability, it is having to invest an increasing sum of money in maintaining these plants. 

The utility is also facing rising costs from its debt load, with its interest payments eating up a significant chunk of revenue. 

This is coupled with a declining customer base as households and companies invest in alternative energy sources first for reliability and, increasingly, to reduce exposure to Eskom’s rising prices. 

As Eskom’s electricity prices keep rising, investing in alternative energy sources becomes more economical for users. 

A longer-term cause of these rising prices was the abandonment of the Eskom Capital Development Fund nearly 30 years ago. 

“Eskom had a Capital Development Fund. Effectively, what this means is that Eskom would put away money every year into a ring-fenced fund that was invested,” energy analyst Chris Yelland said.

“When the time came to build a power station, it had the money available. After the overbuild, Eskom abandoned the fund, saying it did not need to build new power stations.”

As a result, Eskom was able to keep electricity prices extremely low from 1993 to 2004 as it did not put money away to invest in new generation capacity. 

Things changed drastically for the worse when Eskom had to build new power stations, Medupi and Kusile, which began construction in 2007. 

There was no money set aside for their construction, so Eskom had to borrow heavily to get these projects off the ground. 

“Then, in 2008, we had a price shock which continued for the next 15 years. Ideally, the fund would have caused a smoothing effect in the price of electricity, with prices rising steadily at a pace the economy could withstand rather than with a huge shock,” Yelland said.  

“Instead, the price had declined steadily, and then rose sharply, creating a price shock that we are still dealing with today.” 

Bringing prices down 

Eskom has committed to bringing prices down through investing in new generation technologies, such as renewables, and by cutting costs.

This will require the utility to become far more efficient, although it has ruled out job cuts and paid out R5.4 billion in performance incentives in the past financial year. 

Eskom said these bonuses are part of existing agreements, which it argues played a key role in bringing load-shedding through improved staff morale and performance. 

While these payouts do motivate employees, improve morale, and, crucially, align staff performance with outcomes, they do come at a cost. 

This cost is particularly acute considering the repeated above-inflation increases in the electricity price over the past decade. 

In a social media post responding to a disgruntled South African, Nyati said the utility’s chief focus is now on reducing the cost of electricity after it has brought load-shedding to an end. 

“Affordability is a key priority. We have already shifted our focus over the past year – with major diesel savings, better plant performance and grid stability,” Nyati said. 

“Management has a clear cost reduction target: R112 billion in efficiencies over the next five years through our cost optimisation and revenue enhancement programme.”

This will be combined with investment in renewable energy through a newly-created business unit, Eskom Green, which will drive down the cost of producing electricity. 

Eskom’s 2025 financial results showed that it lowered its primary energy costs by 14% to R150.2 billion, indicating that it is making progress. 

Nyati has said previously that South Africa has seen the “peak” in Eskom’s electricity tariff increases, adding that, going forward, the country should not see tariff increases above CPI inflation.

This will be a big change for Eskom, which has become notorious for implementing far above inflation tariff increases over the past decade.

South Africa’s electricity prices have risen by 190% in the past decade, significantly outpacing inflation and placing immense financial pressure on households and companies.