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1. The Eskom and City Power billing dispute is far from resolved.
Following an urgent intervention by Energy and Electricity Minister Kgosientsho Ramokgopa on 11 November 2024, Eskom has withdrawn its threat to cut power to Johannesburg for the time being. This comes after escalating tensions over a billing dispute between the national utility and City Power, Johannesburg’s electricity distributor. Eskom issued a stern notice earlier this month, warning of a potential power interruption to Johannesburg due to what it described as City Power's failure to honour debt repayment agreements. However, the minister convened a high stakes meeting with both parties, averting what could have been a crippling crisis for South Africa's economic hub. Eskom alleges that City Power owes billions in arrears, while the municipality accuses Eskom of overbilling. As tensions flared, Eskom sought to enforce payment compliance, sparking fears of widespread blackouts across the city. A task team led by the South African National Energy Development Institute (SANEDI) has now been instructed by the minister to conduct a thorough technical and financial assessment of the dispute and to report back by 25 November 2024. City Power agreed, in the meantime, to at least settle its October R1.4bn overdue current account with Eskom, with the earlier R3.4bn remaining unpaid pending a resolution of the dispute. While this matter has been painted as a billing accuracy dispute, the continued failure two weeks later by City Power to honour its commitment to the minister and Eskom to settle its overdue current account seems to indicate that City Power is not engaging in good faith, and that the real issue may be cash flow problems, the financial sustainability of Johannesburg's power arrangements, and the poor financial health of the City of Joburg and City Power. The immediate crisis may be averted for now, but the underlying issues are far from resolved.
2. Requirement to update prepayment meter software sparks nationwide panic.
As the 24 November 2024 deadline loomed for recoding of Eskom and municipal prepayment meters, South Africans with prepayment meters scrambled to comply, leading to widespread chaos. The recoding initiative requires about 6.9-million Eskom and 4.6-million municipal prepayment meters to be updated to Key Revision Number 2 (KRN2) to prevent them from becoming inoperable on 24 November 2024 because of a software bug. Despite having over a year to prepare, many consumers have only recently become aware of the urgency, resulting in long queues at Eskom and municipal offices nationwide. The panic is exacerbated by Eskom's communicated stance that for technical reasons there can be no extension to the deadline. Municipalities are also under pressure, with varying degrees of progress in updating meters. The recoding initiative has also uncovered a major problem involving about 2-million Eskom meters and an unknown number of municipal meters that have not been vending electricity for at least the last six months, indicating high levels of faulty meters, payment fraud, meter tampering, bypassing of meters or purchasing of electricity tokens from illegal “ghost vendors”. Such activities are costing Eskom and municipalities, and by extension paying customers and taxpayers, literally billions of rands each year. Eskom is urging all prepaid customers to act immediately to avoid disruption, and says it is providing assistance for those encountering difficulties. The utility further has urged customers who are not paying for electricity to come forward and regularise their relationship with their electricity distributor by buying an electricity token, updating their meter to KRN2, and reporting to their Eskom or municipal distributor if a problem is experienced.
3. Electricity regulator suspended as hearings for 66% electricity price increase start.
In a significant development coinciding with the commencement of public hearings on Eskom's proposed 66% electricity tariff increase over the next three years, Nhlanhla Gumede, the head of electricity regulation at the National Energy Regulator of South Africa (NERSA), has been suspended pending an independent inquiry. The suspension was confirmed by Electricity and Energy Minister Kgosientsho Ramokgopa, who stated that the decision followed a recommendation from NERSA’s board, citing concerns that Gumede's conduct was inconsistent with the regulator's mandate and that he was bringing NERSA into disrepute. Gumede's departure became obvious as NERSA initiated nationwide public hearings into Eskom's latest revenue application, which seeks to increase allowable revenue to R446bn in 2025/26, R495bn in 2026/27, and R536bn in 2027/28. If approved, this would result in tariff hikes of 36.15%, 11.91%, and 9.1% over the respective years. The Organisation Undoing Tax Abuse (OUTA) has voiced strong opposition to Eskom's application, labelling the proposed increases as excessive and detrimental to South Africa's economy and consumers. OUTA's submission to NERSA emphasises the need for Eskom to focus on cost-cutting measures and operational efficiency rather than passing rising costs onto consumers. Minister Ramokgopa, addressing the suspension, described it as a labour relations matter, indicating that the inquiry would determine the appropriate course of action. As the public hearings progress, stakeholders and the public are closely monitoring the situation, given the potential impact of the proposed tariff increases on the nation's economy and the ongoing scrutiny of NERSA’s regulatory practices.
4. Utility-scale battery energy storage in South Africa powers ahead in a big way.
Utility-scale battery energy storage (BES) in South Africa is surging ahead in developments facilitated by the IPP Office. On 17 October 2024, two projects that had been announced as preferred bidders in Bid Window 1 of the Battery Energy Storage Independent Power Producer Procurement Programme (BESIPPPP) reached commercial close, enabling construction to commence. The Mogobe BESS and Oasis Mookodi projects, with a combined capacity of 180 MW/720 MWh, will connect to transmission substations in the Northern Cape and North-West provinces, respectively. These two projects, representing a total investment of R5.3bn, are scheduled to begin commercial operation in September 2026. Mogobe BESS is developed by a consortium led by Scatec, in partnership with Perpetua and a local community trust. Oasis Mookodi is developed by a consortium led by EDF and Mulilo, in partnership with Pele Green Energy, Gibb Crede and a community trust. The announcement on 17 October 2024 was followed a month later by a further media release on 18 November announcing that an additional two BESIPPP Bid Window 1 projects had reached commercial close. The Oasis Aggeneis and Oasis Nieuwehoop projects are both developed by EDF International and Mulilo, with project partners Gibb-Crede, Pele Green Energy and a community trust, and will be located in the Northern Cape province. They will contribute a total of 180 MW/720 MWh storage capacity to the national grid, with a combined investment of R4.7 billion. The storage capacity is expected to come online in November 2026. BESIPPPP Bid Window 2 for a further 615 MW/ 2460 MWh is currently in the evaluation phase, with the bid outcome announcement expected within the next few weeks. Bid submission for Bid Window 3 is planned for 28 November 2024.
5. Flurry of public engagement processes as the summer holiday season approaches.
In typical fashion, the approach of the summer holidays in South Africa signals a flurry of public engagement processes in desperate efforts to meet deadlines promised by the country’s politicians and bureaucrats. Firstly, country-wide NERSA public hearings commenced in Cape Town on 18 November 2024 in respect of Eskom’s application for a 66% electricity price hike over the next three years. The hearings will end at the Eskom Academy of Learning in Midrand on 3 and 4 December 2024. The intention is for NERSA to finalise its revenue and price determination for the next three years by 20 December 2024. Secondly, with only three days’ notice, on 22 November 2024 the DMRE announced a further round of targeted stakeholder engagements on 26, 27 and 28 November 2024 in respect of an update to the draft integrated resource plan for electricity, Draft IRP 2023. Minister Kgosientsho Ramokgopa had earlier indicated that further modelling and another round of stakeholder engagements was needed to address significant inadequacies identified and highlighted by stakeholders. These engagements would be conducted with organisations that made substantive input to the previous public participation process in early 2024. A new Draft IRP is expected by year end, which will then proceed to NEDLAC and the cabinet in further processes expected to take at least three months before the final IRP is published sometime in 2025. Thirdly, NERSA has called for written comments on Eskom’s retail tariff plan (RTP) by 17 December 2024, followed by public hearings on 18 December 2024. The Eskom RTP applies for significant structural changes to Eskom’s electricity tariffs, and the intention is for NERSA to make a determination or approve Eskom’s RTP by year-end or early next year.
6. Emerging new business model options for struggling electricity distribution sector.
A recent briefing note by Meridian Economics has highlighted systemic issues plaguing the municipal electricity distribution industry. These include a decline in financial sustainability, rising municipal debt, deteriorating infrastructure, skills shortages, revenue collection challenges, increasing electricity and infrastructure theft and vandalism, and more. The report suggests that involving the private sector and adopting regional electricity distribution models could stabilise the sector and ensure sustainable service delivery. Municipalities are currently seeking new business models to address the persistent challenges. One recent initiative is the Midvaal Municipality’s decision to transition from the municipality operating as a municipal electricity distributor itself, to contracting with a private service provider/concessionaire through a 20-year public-private partnership (PPP). This initiative aims to enhance service delivery and revenue collection, improve infrastructure efficiency, and shift capital funding, revenue and technology risks to the concessionaire. This could serve as a pilot project in a new approach to municipal electricity distribution in South Africa. The South African Independent Power Producers Association (SAIPPA) has advocated for municipalities to explore outsourcing power distribution. SAIPPA management committee member Thomas Garner highlights that such partnerships could ease the financial and operational burdens faced by municipalities. Adding to the momentum, international interest in South Africa's electricity distribution industry is growing, with companies from the USA and China expressing interest in bidding for PPP contracts such as that in Midvaal. This signals emerging alternative options and a departure from traditional reliance on failing municipal electricity distributors. These developments also mark the start of a transformative period for South Africa’s electricity distribution sector, as national and local government structures increasingly explore PPPs and other options for sustainable service delivery.
7. Teraco to wheel power from 120 MW solar PV plant to data centres in South Africa.
Teraco, a leading data centre operator in South Africa, has announced construction of a 120 MW solar PV plant in Free State province. The project will supply renewable energy to Teraco’s data centres across the country, including facilities in Cape Town, via the Eskom transmission grid and municipal networks. The solar PV plant is expected to be operational by late 2026, generating over 354 000 MWh of clean electricity annually. The wheeling of power through Eskom and municipal grids is a step toward providing green energy to its growing number of data centres in the country. Jan Hnizdo, CEO of Teraco, highlighted the importance of the investment, particularly as the demand for computing applications, such as artificial intelligence, continues to rise. “The current constraints on electricity generation in South Africa, combined with the increasing demand for digital transformation, make renewable energy solutions like this essential for the future," Hnizdo stated. Teraco has partnered with Juwi and Subsolar Energy, two well-known renewable energy companies in the sector. Subsolar Energy is the developer of the project, while Juwi is has been given the task of EPC, overseeing the design, engineering, procurement, construction and commissioning of the plant. Teraco will collaborate with Eskom to facilitate the transmission grid connection to enable wheeling of the power. The project aligns with Teraco’s long-term sustainability goals and underscores its commitment to leveraging renewable energy to power Africa’s digital transformation. The initiative continues the growing private sector participation in diversifying the power generation sector through self-generation and wheeling of renewable energy in South Africa.
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