SA’s municipal power supply goes downhill

South Africa’s municipal electricity system is entering adangerous phase of declineas falling revenue collection, rising tariffs and deteriorating infrastructure undermine the financial model that has sustained power distribution for decades. As businesses and wealthier households increasingly turn torooftop solarandprivate generation, municipalities are being left with shrinking revenue bases while carrying the fixed costs of maintaining ageing electricity networks. As the pressure intensifies, new renewable energy models are beginning to emerge that aim to stabilise municipal electricity finances while lowering energy costs.

The proposals are designed to address a central weakness in the country’s electricity system: municipalities rely on electricity sales to fund their operations, yet they are increasingly unable to sustain the networks that deliver that power. The implications extend far beyond electricity supply. For most municipalities, electricity sales are one of the largest sources of income and a key mechanism for funding other public services.

As the revenue declines, the financial strain is beginning to ripple across water systems, road maintenance and other basic services. Rakesh Maharaj, an electrical engineer who has worked across Eskom, municipal electricity systems and renewable energy projects, said the electricity distributors are entering what economists describe as a utility death spiral. “Very simply put, we have a decreasing income base with rapidly increasing tariffs,” Maharaj said.

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“As tariffs increase, more people leave the grid. Those who can afford to put up their own generation do so. What’s left is a smaller base with higher costs.” The dynamic has become increasingly visible across the energy landscape.

Businesses and middle-income households have installed solar panels and backup generation in large numbers to escape both load-shedding and rising electricity prices. While the shift provides relief for the customers, it also undermines the revenue model that municipal electricity distribution depends on. The result is a cycle in which declining electricity sales force utilities to raise tariffs, prompting even more consumers to reduce their reliance on the grid.

“The biggest challenge is that the poorest of the poor get hit the most,” Maharaj said. “If you look at tariffs across the country, prepaid indigent customers are often paying more for electricity than large-scale users.”

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