City Power, Eskom Settle R3.2 Billion Dispute in Electricity Debt Agreement

In a move that signals potential relief for municipalities mired in financial disputes with Eskom, City Power and the national power utility have reached a milestone agreement to resolve a long-standing conflict over bulk electricity debt and billing disputes. The deal, officially announced by the Minister of Electricity and Energy, Dr. Kgosientsho Ramokgopa, outlines a structured resolution that will see City Power pay R3.2 billion over the next four years, while Eskom writes off R830 million in interest and penalty costs.

This resolution marks a pivotal step toward improved cooperation between power utilities and local distributors, potentially serving as a model for future municipal negotiations across the country.

Key Terms of the Agreement

Dr. Ramokgopa detailed the main components of the settlement during a media briefing on Tuesday:

• R3.2 Billion Settlement: City Power will repay Eskom R3.2 billion over a period of four years. This figure represents the core amount City Power acknowledges as its outstanding obligation to the national utility.

• R830 Million Debt Relief: Eskom has agreed to cancel R830 million worth of accumulated interest, penalties, and charges. These include:

  • Interest payments on overdue bills.

  • Penalties tied to City Power exceeding its Notified Maximum Demand (NMD).

  • Disputed estimates related to load shedding impacts.

These concessions come after a comprehensive financial audit and extended negotiations between both parties, highlighting the complexities in municipal-Eskom relationships regarding billing formulas and peak demand penalties.

Winter Tariff Adjustments and Structural Relief

Dr. Ramokgopa also acknowledged the seasonal strain imposed by time-of-use tariffs, particularly in winter, which disproportionately affects consumers and municipalities alike. As part of the resolution, Eskom has agreed to introduce temporary relief measures during the winter months, offering flexibility to City Power in meeting its payment obligations without incurring further penalties or disruptions.

He emphasized that this approach is intended to alleviate the financial stress experienced by households and industrial users during high-demand periods, where energy prices escalate sharply due to peak consumption pricing mechanisms.

A Template for Other Struggling Municipalities

The Minister expressed optimism that this resolution could be replicated in other municipalities facing similar financial pressures and unresolved debts with Eskom.

“We are excited about this development. We also have something similar in Tshwane, and as municipalities come forward, we will have these discussions on how best to provide a degree of relief,” he said.

However, he cautioned that relief must be balanced with Eskom’s operational needs. The utility, which faces its own cost and debt challenges, must ensure sustainable revenue collection to fund infrastructure and power generation investments.

“Eskom must collect what is due to it because the generation of electricity involves real costs. Any relief extended must be responsible and financially justifiable,” the Minister added.

Implications for South Africa’s Energy Landscape

This development comes at a critical juncture for South Africa’s energy sector, where the financial instability of municipal distributors has exacerbated Eskom’s operational challenges. Municipalities currently owe Eskom over R70 billion cumulatively, with many struggling to enforce payment discipline among end-users.

The City Power-Eskom agreement presents a collaborative model—grounded in transparency, fiscal realism, and policy alignment—that other municipalities might emulate to escape debt spirals. It also opens the door for structured negotiations that incorporate seasonal pricing realities and historical billing disputes.

Looking Ahead

The Energy Ministry has indicated that a broader framework for resolving municipal debts could be rolled out, pending the outcomes of similar negotiations with cities like Tshwane and Ekurhuleni. Meanwhile, Eskom is expected to continue focusing on tariff reforms, improved metering infrastructure, and more predictable bulk billing systems.

The public and energy stakeholders will be watching closely to see how this deal influences power dynamics and service delivery at the local government level.