Cape Town seals first agreements to buy power at below Eskom rates
· Citizen
The City of Cape Town has made further strides in reducing its energy dependence on Eskom, entering into two 20-year power agreements to buy 70MW of power at a lower price than Eskom tariffs.
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Mayor Geordin Hill-Lewis announced the agreements, worth an estimated R8 billion, with independent solar power producers Jempec Energy and Make a Difference.
The power they produce will be connected to the city’s grid in Atlantis and Philippi. The city will save 19-21% on power purchases compared to current Eskom rates.
“Families cannot be expected to absorb endless Eskom price increases forever, that’s why we are working to end reliance on expensive Eskom power to make electricity more affordable for Capetonians,” said Hill-Lewis.
Cape Town has made securing electricity from alternative providers a priority, previously saying that since electricity is its single largest input cost, it is essential to find ways to limit Eskom’s impact on energy prices.
The city said in a statement: “Importantly, price increases on these agreements will be linked to the Consumer Price Index (CPI), rather than unpredictable Eskom hikes, over the next 20 year[s].”
Eskom’s aggregate standard tariffs have increased at almost 15% a year since 2008, compared to average CPI inflation of about 5.8% over this period, according to economic data provider Codera Analytics.
Eskom death spiral
The growing move towards renewable and independent power projects poses a risk to Eskom’s sales, which are in decline as it faces more competition and as more households install solar power.
In its annual results for the year ended March, released on Monday (31 August), Eskom notes an increase in profit to R30 billion from R14 billion, but a sales decline of 6%, in part due to the loss of industrial customers such as ferrochrome smelters.
It says it wants to “arrest its sales decline”, while preparing Eskom for a more competitive electricity market at the same time as it tries to reduce its R300 billion debt.
The sales decline comes as Eskom continues to face large municipal debt levels, having written off cumulative debt of R4.2 billion in March 2026. Its municipal debt levels sat at R111 billion by end-March, 18% higher than in the 2025 financial year.
According to its results presentation “municipal debt remains the single largest threat to financial sustainability”, with Eskom warning that without action, non-payment at the same pace could escalate to R300 billion by 2030.
While many municipalities struggle to pay for electricity, Cape Town has multiple projects underway to diversify its sources of electricity away from Eskom.
It says it is the first city in South Africa to buy power on the open market.
- It allows Cape Town households and businesses to sell surplus energy back into the grid in return for cash payouts and municipal credits, earning residents R67 million since June 2024.
- It launched a system of ‘wheeled’ energy trading across the municipal grid, enabling more than 1 700 megawatt hours (MWh) to change hands between producers and consumers since 2024.
- It has brought the city’s first self-built solar and battery storage facility online in Atlantis, combining a 7MW solar power plant with 10MWh of battery storage, with further municipally-built renewable energy projects and upgrades to existing plants in the pipeline.
- It is also rolling out a major procurement drive to purchase power from independent producers and energy traders, spanning technologies such as waste-to-energy, in support of a circular economy and carbon-neutral goals.
Minister of Electricity and Energy Kgosientsho Ramokgopa recently said he wants to introduce drastic measures to ensure Eskom can compete against private sector entities in a competitive electricity market, such as “liberating” Eskom from the restrictions of Public Finance Management Act (PFMA).
At the same time, the recently gazetted Electricity Sector Market Transformation paper – which outlines a vision for a competitive wholesale market where private power generators and Eskom compete equally to sell to bulk buyers – has suggested there may need to be regulation to ensure Eskom does not dominate or distort the wholesale market.
This article was republished from Moneyweb. Read the original here.