Electricity Pricing Policy That Puts Suppliers Before Consumers

South Africans could face substantially higher monthly electricity charges, regardless of how much power they use, if the government’s revised Electricity Pricing Policy is adopted without significant changes.

This is one of OUTA’s central concerns in its submission to the Department of Electricity and Energy on the draft Electricity Pricing Policy (EPP 2026), published for public comment on 28 August 2026.

OUTA warns that the policy places too much emphasis on protecting the revenue of existing electricity suppliers, rather than encouraging competition, efficiency and affordable electricity for consumers.

The revised EPP will replace a policy dating from 2008 and, once finalised, will guide the National Energy Regulator of South Africa (NERSA) in determining electricity prices and tariffs for years to come.

OUTA supports the revision of the outdated policy, as well as the unbundling of Eskom and the establishment of an independent National Transmission Company of South Africa (NTCSA). However, several provisions in the draft EPP appear to pull in the opposite direction to the competitive electricity market reforms they are intended to support.

“Read as a whole, the revised EPP goes to inordinate lengths to protect the revenues of the de facto monopoly incumbents – Eskom Generation, the NTCSA, Eskom Distribution and municipal electricity distributors – through sharply increasing, non-bypassable fixed charges on every customer connected to the network,” says Wayne Duvenage, CEO of OUTA. “The whole point of market reform toward a diversified and competitive electricity supply industry is that incumbents may lose market share to competitors, self-generation and prosumers, to pressure the incumbents to respond by cutting costs and improving their efficiency and service. The revised EPP instead serves to guarantee the revenue of the incumbents come what may and shifts their business risk onto the customer.”

A wall of fixed charges

The revised EPP provides for fixed generation capacity, standby, network capacity, retail and subsidy charges to be levied on all customers, including residential and small commercial customers, and states plainly that revenue lost when customers reduce their consumption “must still be recovered”. It does so without any analysis of the affordability consequences for low-consumption households and small businesses, or of the well-documented consequences of high fixed charges on prepaid customers, which could encourage: meter tampering and bypassing; illegal connections; purchases from “ghost vendors”; non-payment and civil unrest.

OUTA does not oppose rational, carefully considered fixed charges. It does, however, reject the notion that the fixed and variable components of a tariff be in the same ratio as the fixed and variable cost structure of the supplier. OUTA also opposes any sudden or significant increase in fixed components without careful socio-economic impact assessment and gradual phasing.

OUTA notes that NERSA launched a market inquiry and draft report on generation capacity, network capacity and other fixed charges in November 2025, and that the draft EPP pre-empts the outcome of that inquiry and its final report.

“Fifteen years of above-inflation electricity tariff increases – under a regulated monopoly – has shown that regulation alone does not deliver efficiency. Competition, customer choice and the credible threat of customers introducing their own energy solutions, are the most powerful levers we have to contain electricity prices. The revised EPP should harness these forces, instead of acting to neutralise them,” says Duvenage.

Solar customers should not be penalised for reducing demand

OUTA is also concerned that the revised EPP could discourage households and businesses from investing in rooftop solar and other alternative energy solutions.

Proposals relating to mandatory time-of-use tariffs, fixed charges and the treatment of electricity exported back into the grid could reduce the financial benefits of self-generation.

Households that invest their own money in solar systems reduce their dependence on the national grid and can help relieve pressure on the electricity network. Government policy should encourage responsible investment in alternative energy, not create unnecessary financial barriers.

OUTA believes customers should have access to fair tariff choices and transparent compensation arrangements for electricity exported to the grid.

A policy, not a tariff design manual

OUTA’s overarching recommendation is that the revised EPP be rewritten as a concise, plain-language statement of government’s pricing principles and policy positions that is understandable to parliamentarians, regulators, officials, customers and the public.

Large parts of the current draft read as a regulatory methodology or tariff design manual, freezing technical detail into policy for the five years between reviews. At the same time, the document is silent on matters that are policy-related, including whether fixed charges should apply to low-consumption prepaid households; whether tariff options are voluntary or mandatory; how expanded Free Basic Electricity (FBE) will be funded; and whether a customer who goes fully off-grid remains liable for monthly network charges. The draft is also inconsistently compiled, and in some instances, it is contradictory.

Among OUTA’s recommendations to the DEE are that:

• Costs arising from imprudent or inefficient conduct – including unauthorised, irregular, fruitless and wasteful expenditure, fraud, and the capital cost overruns of Medupi and Kusile – must not be recovered from customers, and NERSA should apply independent cost benchmarking and published efficiency targets in every revenue determination.
• A thorough, independent review of the asset valuation methodology is required before “replacement value” is entrenched in policy, and the allowed return on assets should be set at the lower end of the range consistent with efficient financing, and to pressure the incumbents to respond by cutting costs and improving their efficiency and service.
• Energy, generation capacity and transmission costs should be pure pass-through costs, with distributors, retailers and resellers earning a fair return only on their own assets and no percentage mark-up on input costs – the mechanism by which municipalities have for decades diverted electricity revenue to fund other services.
• Far more ambitious, benchmarked limits should be set on the technical and non-technical losses that may be passed through to paying customers, and licensees should be required to publish their losses, bad debt and collection rates annually per customer segment.
• A customer who goes fully off-grid, following published procedures, should have no continuing liability for any monthly fixed, availability, network, capacity or levies on the supply of electricity.
• Every negotiated pricing agreement should be preceded by an independent, published cost-benefit analysis and public consultation, with its cost to other customers and the fiscus quantified and disclosed.

“The revised EPP comes at a decisive moment. The legislative framework for an unbundled, competitive industry is in place, and the choices made in this policy will determine whether reform delivers lower costs, better service and greater choice for customers, or whether it entrenches the revenues of the incumbents behind a wall of fixed charges. OUTA will continue to engage with the DEE on the policy and will participate in any public hearings or workshops that follow,” concludes Duvenage.