No guarantee energy transformation will lower electricity prices, says Ramokgopa
· Citizen
Minister of Electricity and Energy, Dr Kgosientsho Ramokgopa, has cautioned that transforming South Africa’s energy sector does not automatically mean households will see lower electricity prices.
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This comes as the department accepts public input on the Revised Electricity Pricing Policy. The policy is being amended to reflect the current state of electricity and provide relief for South Africans.
On the other hand, President Cyril Ramaphosa, together with National Treasury and the Department of Electricity and Energy, are pushing for the unbundling of Eskom, citing that the unbundling will end Eskom’s historical monopoly, introduce market competition, and attract private investment to fix the country’s energy crisis.
No promise for lower electricity prices
While the government says it is making these changes with low-income households in mind, Ramokgopa, in a parliamentary reply, said he cannot promise that transforming the energy sector will benefit these households.
He was asked by EFF member of parliament (MP) Lorato Florence Tito, “What guarantees have been put in place that the current energy reforms will translate into lower costs and greater reliability for ordinary households, rather than simply restructuring the institutions responsible for electricity, as the citizens are still facing the economic consequences of unreliable electricity and rising energy costs?”
Ramokgopa said several other factors control electricity prices; thus, there is no guarantee of lower prices.
“There can be no responsible guarantee that the transformation of the energy sector will immediately eliminate the cost pressures being experienced by households. Electricity prices are affected by several factors, including generation costs, the condition of transmission and distribution networks, municipal surcharges, debt levels, maintenance requirements, fuel costs, and the need to invest in new capacity after many years of under-investment.”
Minister hits back
Ramokgopa did not take it lightly that transformations in the energy sector are being labelled “an institutional restructuring exercise”.
“However, I do not accept the proposition that the current transformation of the energy sector is merely an institutional restructuring exercise,” he said. “The objective is to address the structural weaknesses that have contributed to unreliable electricity supply, insufficient investment, constrained grid capacity, and rising system costs.”
Ramokgopa referred to the Electricity Regulation Amendment Act of 2024, which provides the legal framework for a more competitive and transparent electricity supply industry.
The Act enables, among other things, non-discriminatory access to the transmission network, the establishment of an independent transmission system operator, improved system planning and operation, and the gradual development of a wholesale electricity market.
Downward pressure on electricity prices will take time
Ramokgopa noted that the measures in the Electricity Regulation Amendment Act are intended to increase investment in new generation capacity, improve the efficient use of the national grid, strengthen security of supply, and introduce greater discipline into the electricity supply system.
“Over time, increased supply, better planning, improved operational efficiency and transparent market mechanisms are expected to place downward pressure on the cost trajectory of electricity,” he said.
“The Honourable Member is correct that ordinary households are facing serious economic pressure from unreliable electricity and rising electricity costs. For this reason, the Department of Electricity and Energy (DEE) is pursuing sector transformation alongside measures to improve affordability and protect vulnerable households, including work on Free Basic Electricity, indigent support, distribution sector improvements, and more sustainable approaches to universal energy access.
“The transformation of the energy sector is therefore not an end in itself. It is a means to build an electricity system that is more reliable, more transparent, more investment-ready, and ultimately more affordable for households, businesses and communities.”
Plans to lower electricity prices
In a separate parliamentary question, IFP MP Nompumelelo Happiness Mhlongo asked Ramokgopa what plans the department has to fight high electricity prices.
To answer this question, the minister cited the Revised Electricity Pricing Policy, stating the measures in the policy are expected to improve affordability, price stability and predictability over the medium to long term.
One measure in the policy is to protect customers from being punished by municipalities and Eskom.
“Preventing inefficiencies from being passed on to consumers: Tariffs will be based only on efficient and prudent costs, while excessive technical losses, electricity theft, bad debt and other inefficiencies will not be recoverable from consumers through tariffs. The National Energy Regulator of South Africa (Nersa) will benchmark and scrutinise these costs before approving tariffs.”
Transparency
Ramokgopa added that the policy will provide customers with transparency about their electricity bills.
“Reducing municipal pricing inefficiencies: The policy introduces greater transparency, ring- fencing of electricity revenues, and standardised tariff methodologies across municipalities, helping to reduce unjustified tariff disparities and hidden charges.
“Increasing transparency in electricity bills: Unbundled billing will allow consumers to see the separate costs of energy, network services, ancillary services and municipal surcharges, making it easier to identify and challenge inappropriate charges.”
The policy also plans to increase units given to low-income households through the Free Basic Electricity (FBE) policy.
“Collectively, these measures are expected to improve affordability, price stability and predictability over the medium to long term.”