Households and small businesses will not be able to choose who sells them electricity when South Africa’s competitive electricity market opens, and those who install rooftop solar but stay connected to the grid will keep paying network charges – while anyone who disconnects entirely pays nothing.

That is set out in the draft Electricity Sector Market Transformation Position Paper (PDF), published in the Government Gazette on Friday. Cabinet approved it for public comment on 30 July, alongside a revised electricity pricing policy. The two documents do different jobs. The pricing policy governs how tariffs are set, while the position paper describes the market those tariffs will operate in, which it calls the South African Wholesale Electricity Market, or Sawem – the competitive wholesale trading environment envisaged by the Electricity Regulation Amendment Act of 2024.

The paper covers generation, transmission, trading and retail. Its treatment of retail is the part most South Africans will feel, and it is more restrictive than public discussion of the reform has suggested.

Two categories of customer are exempted from the incumbent:

Eligible wholesale customers may buy directly from the centralised market rather than through an intermediary.
Eligible retail customers may pick an independent trader or the trading arm of a distribution company.

Both categories are defined by size, and during the transition period the paper limits eligibility to energy users above a threshold that has not been set.

Everyone else – the paper’s own word is “captive” – stays with the retail arm of whichever distributor already serves them, on regulated tariffs. That includes all residential households and smaller commercial customers connected at distribution level. Nersa will be required to regulate those retailers and to protect the interests of end-use customers, particularly the most vulnerable. The paper says eligibility will widen over the longer term under a “retail code”, which has not been drafted and carries no date.

The document twice offers 1MW as an illustration of where a threshold might sit, without committing to it. For scale, Eskom’s residential tariffs are built around 20A and 60A supplies, and a 60A single-phase connection is 13.8kVA. A 1MW threshold would be more than 70 times that. Even a large household with a full rooftop system – Eskom puts a typical residential installation at 16kVA – would not be close.

The paper is explicit about what grid-connected solar users owe. Customers entirely off the grid pay no system charges. Customers who draw some power from the grid, or who want to sell surplus into it, pay network charges.

That is not a new charge, and the position paper does not create one – the level of network charges remains a matter for Nersa. Under the retail tariff plan Nersa has approved, Eskom has been shifting cost recovery towards fixed monthly charges, a shift that falls hardest on low-consumption customers, including solar households.

Fixed charges

Eskom has meanwhile been easing registration rules to get those systems onto its books. What the paper does is entrench the principle. One of its guiding principles is to discourage free riding, and it states that as the share of fixed costs rises, prices per unit of output will matter less and fixed charges will matter more. It adds that network charges, including any cross-subsidisation inside them, should not be avoidable through a customer’s choice of retailer or trader.

Put beside the retail rules, that produces a specific outcome for households: cost-reflective tariffs with a growing fixed component, and no ability to switch supplier. Rooftop solar reduces the variable portion of the bill and leaves the fixed portion behind. Only full disconnection removes both, and that is the sole route out the paper leaves open to a residential customer during the transition period.

Read: A hidden charge in your electricity bill is being scrapped

Tariffs have risen by more than 900% since 2007, according to Ramokgopa, and Eskom direct customers absorbed a further 8.76% on 1 April. Government argues that competition will bring costs down over the long term. In the meantime, the charge structure rewards a customer who leaves the network altogether over one who stays connected and generates most of their own power – the outcome a utility trying to hold on to its customer base would least want.

The paper also requires every distributor to separate its wires business from its retail business in the medium term, each separately licensed and separately remunerated. For municipalities that fund general operations out of electricity trading surpluses, that is a structural change to the balance sheet. Eskom itself is to be split into legally distinct generation, transmission and distribution entities, having already proposed a four-subsidiary structure for the market.

It goes further. Participation in the centralised market requires meeting prudential requirements, and the paper concedes that some municipal distributors may not be able to. Government proposes a mechanism to let non-qualifying distributors procure electricity while distribution reform continues. Municipal arrears to Eskom stand at about R110-billion, and Eskom’s distribution unit cannot be separated out until that is resolved.

Government wants to soft-launch market operations this year and open the market beyond Eskom from 2027. Singapore, which ran the first phase of retail contestability in 2001 and lowered the threshold in stages, reached households in 2018. Nothing in the gazetted paper says when South African households will get a supplier to choose from. — © 2026 NewsCentral Media