Real reason South Africans are paying 600% more for electricity than in 2009

Eskom’s soaring production costs are the primary reason South Africans are now paying 600% more for electricity than in 2009, with diesel spending in particular becoming a major thorn in the utility’s side.

This is despite Eskom having stabilised its operations and improved its energy availability factor over the past few years.

To make matters worse, Eskom is stuck in expensive power purchase agreements for diesel, which are designed to include a minimum fuel burn requirement.

This means Eskom is sometimes forced to use a more expensive method of producing electricity, even when a cheaper option is available.

Ramokgopa outlined the factors behind South Africa’s sky-high electricity prices in response to two recent Parliamentary questions.

MK Party MP David Skosana asked Ramokgopa about the biggest cost drivers behind recent electricity tariff increases.

From 1 April 2026, direct customers are paying 8.76% more, and municipalities are paying 9.01% more for electricity from Eskom.

Ramokgopa replied that these tariff increases are based on the outcome of the Multi-Year Price Determination process undertaken by the National Energy Regulator of South Africa (NERSA).

He outlined the seven key cost drivers that contributed to the approved increases, starting with the largest cost component: Primary energy costs.

This includes the cost of coal, nuclear fuel, independent power producer (IPP)  purchases, and diesel usage for Eskom’s open-cycle gas turbines (OCGTs).

“The continued reliance on diesel generation to support system stability and mitigate load-shedding remains a significant upward pressure,” Ramokgopa said.

Despite the progress Eskom has made in stabilising its operations and electricity supply over the past few years, the utility continues to purchase large amounts of diesel for its OCGTs.

OCGTs and coal-fired power plants both generate electricity, but differ in terms of technology, purpose, operating behaviour, efficiency, and, crucially, cost.

In South Africa, OCGTs play a crucial role in maintaining the balance between electricity supply and demand due to their operational flexibility.

This is because they start up extremely quickly and can therefore provide critical support during peak demand periods where coal-fired power plants cannot keep up.

OCGTs can also be shut down immediately once they are no longer needed, unlike coal-fired stations that are designed for continuous, baseload operation.

Eskom therefore heavily relied on OCGTs and costly diesel during peak load-shedding periods.

Eskom’s diesel contracts

In a separate Parliamentary question, DA MP Kevin Mileham asked Ramokgopa why, in light of the utility’s improved operations, Eskom has not renegotiated the legacy contracts with which it procures diesel for its OCGTs.

Ramokgopa explained that, for both Eskom-owned and IPP OCGTs, electricity production costs are extremely high, primarily because diesel is an expensive fuel.

Mileham estimated that diesel costs over 10 times as much as coal on a per-kWh basis.

“The system cannot rely on coal stations alone, as they lack the fast-acting flexibility required to stabilise the grid, especially with the growing share of variable renewable energy,” Ramokgopa said. 

“Demand peaks fluctuate daily, and renewable generation (particularly wind and solar) varies with weather conditions.” 

“To maintain system stability, the grid requires fast-responding generation such as OCGTs that can fill gaps instantly when renewables drop, or demand unexpectedly rises.”

Regarding Eskom’s power purchase agreements for the diesel needed to run its OCGTs, Ramokgopa explained that they were designed to address various risks faced by the investors.

“A key risk is fuel degradation. Diesel cannot be stored indefinitely, as it deteriorates over time and becomes unsafe for turbine use,” he explained.

“For this reason, the contracts include a minimum fuel burn requirement over each six-month period.”

“This obliges the system operator (NTCSA) to dispatch the OCGT plants even when cheaper generation is available.”

The minister confirmed that Eskom has spent over R93 million on diesel in just three weeks for this reason.

“The costs highlighted in the three weeks referenced in the question were incurred because the minimum fuel burn obligation had not yet been met within the six-month window,” he said.

“These costs were not triggered during other periods, when the plant was dispatched, and the minimum fuel burn was achieved.”

Despite the high costs associated with these agreements, Ramokgopa said termination is not a viable option.

This is partially because the power system still requires the operational flexibility that OCGTs provide, particularly as renewable penetration increases. In addition, the minister said the cost of termination would be substantial.

“The plants act like an insurance policy, unwelcome when not used, but essential when the system is under strain,” he said.

However, he noted that options to convert these plants from diesel to gas are under evaluation. 

“A fuel switch would significantly reduce operating costs and still retain the flexibility needed to balance the power system,” he said.