Cape Town’s 2025/26 electricity tariffs mark the city’s most sweeping pricing overhaul in decades. Effective 1 July 2025, the municipality simultaneously constrained its average price hike to 9.32%, below Eskom’s 11.32% bulk‐supply rise, while unbundling hidden cross-subsidies that had distorted household bills for years. The result is a three-tier tariff system that treats energy and network costs as separate items, reshapes the financial load on different customer groups, and signals where municipal electricity pricing is headed.
National Price Pressures in 2025
South African consumers entered 2025 already bracing for steep electricity hikes. NERSA granted Eskom an 11.32% increase on sales to municipalities and 12.74% to direct customers. Most large metros responded with double-digit end-user rises; Ekurhuleni hit 13.40%, Johannesburg 12.41%, eThekwini 12.72%, and Nelson Mandela Bay 12.88%. Typical 656 kWh households in those cities saw monthly bills climb R270–R330. Against that backdrop, Cape Town’s 9.32% stands out.
Why Cape Town Could Go Lower
Cape Town’s moderate increase is the product of a city-wide financial reset rather than short-term discounts.
- Treasury Guidance: National Treasury instructed municipalities to strip non-electricity costs—street-lighting, city cleaning, general rates support—out of electricity tariffs and fund them transparently elsewhere.
- Cost-of-Supply Study: A multiyear analysis showed roughly 10% of Cape Town’s old electricity tariff had been subsidising unrelated services. Removing that surcharge immediately lowered the energy rate base.
- Infrastructure Ring-Fencing: By charging for network maintenance through a fixed “Service and Wires Charge,” the city could reduce the variable energy component without jeopardising grid investment.
Anatomy of the New Three-Tier Structure
Lifeline Tariff
- Who qualifies: Property value ≤ R500,000, monthly usage < 450 kWh, prepaid meter.
- Energy rate: R2.61/kWh (VAT incl.).
- Fixed charge: None.
- Free Basic Electricity (FBE): 60 kWh/month if average use < 250 kWh, 25 kWh if 250–450 kWh.
- Average increase: 9.88%.
Domestic Tariff
- Who qualifies: Property value R500,000–R1 million, prepaid meter, usage > 450 kWh.
- Energy rates:
- Block 1 (0–600 kWh): R3.91/kWh.
- Block 2 (> 600 kWh): R4.65/kWh.
- Service & Wires Charge: R68.89/month (new).
- Average impact: 0.65%–7.11% depending on consumption.
Home User Tariff
- Who qualifies: Property ≥ R1 million OR any value with a credit meter.
- Energy rates:
- Block 1 (0–600 kWh): R3.38/kWh (-1.7%).
- Block 2 (> 600 kWh): R4.42/kWh (-7.05%).
- Service & Wires Charge: R390.87/month (↑ 38.71% from R281.78).
- Average impact: -3.44% to 8.28%, driven mainly by usage level.
Why Fixed Charges Grew
Historically, network upkeep was hidden inside per-kWh prices; heavy users paid a disproportionate share while low users paid little. The explicit Service & Wires fee now spreads those grid costs more evenly. Lifeline customers remain exempt, Domestic users face a modest R68.89, and Home User households (typically higher income) pay the full R390.87.
What a Typical Bill Looks Like Now
| Scenario | Monthly kWh | 2024/25 Bill | 2025/26 Bill | Difference |
| Lifeline (250 kWh) | 250 | R585 | R643 | +R58 |
| Domestic (600 kWh) | 600 | R2,123 | R2,230 | +R107 |
| Home User (1,000 kWh) | 1,000 | R4,564 | R4,780 | +R216 |
Figures are VAT inclusive and incorporate new fixed charges. The pattern is clear: low-income users see the smallest rand increase; mid-range users absorb both the new fixed fee and higher energy rates; high-consumption households pay more in absolute terms but benefit from cheaper per-kWh rates that soften the blow.
How Cape Town Compares to Other Metros
On a like-for-like 656 kWh basket for a R1 million property:
- Cape Town: ± R2,430.
- Johannesburg: ± R2,700.
- eThekwini: ± R2,710.
- Ekurhuleni: ± R2,760.
Add in property rates, water, refuse, and sanitation, and Cape Town’s total municipal bill remains R500–R800 below Johannesburg for homes under R3 million and even cheaper versus higher-tariff metros like Ekurhuleni.
Infrastructure Investment Tied to the New Charges
Cape Town plans R39.7 billion in infrastructure over three years, a 63% higher spend than Johannesburg, with nearly one-third earmarked for electricity network upgrades. Fixed charges guarantee revenue for:
- Cable refurbishment and fault response.
- Substation upgrades to integrate rooftop solar and battery storage.
- Smart-meter roll-outs that enable time-of-use pricing in future.
Social Safety Nets Remain Intact
The expanded FBE allotment and zero-fixed-charge Lifeline tier help shield the poorest households. Integration with prepaid meters prevents debt build-up and gives users real-time insight into consumption, trimming average usage by roughly 11% according to city studies.
Prepaid vs Credit Meters: Clearing Up Confusion
All unit prices are identical before VAT; the difference lies in billing:
- Credit meters: City issues a monthly invoice, energy line items shown ex-VAT, VAT added at the end.
- Prepaid meters: Users buy tokens, price shown VAT inclusive at point of sale.
Because Home User status hinges on meter type, property owners opting to switch from credit to prepaid can qualify for cheaper energy blocks but must still pay the R390.87 fixed charge.
Legal Headwinds and Compliance Questions
Consumer groups have challenged Cape Town’s past practice of charging slightly above NERSA-approved rates. Court rulings are pending on potential refunds. City officials argue the 2025/26 redesign fully aligns with regulator guidelines and Treasury directives, reducing future litigation risk.
Looking Ahead
Cape Town’s unbundled tariff better aligns with national moves toward cost-reflective pricing and paves the way for additional innovations:
- Time-of-Use Rates: With fixed network costs carved out, the energy charge can vary by hour, rewarding customers who shift demand off-peak.
- Dynamic Rooftop Solar Tariffs: A clear separation of network fees eases future net-billing schemes, where prosumers pay for wires but receive market-linked prices for exported energy.
- Grid Modernisation Funding: Predictable fixed revenue supports the R440 billion national transmission build needed to carry renewable power from the Cape provinces northward.
Key Takeaways
- Moderation amid turbulence: At 9.32%, Cape Town’s increase undercuts both Eskom’s bulk hike and every other major metro.
- Transparency replaces cross-subsidy: Explicit Service & Wires Charges reveal the real cost of grid upkeep and remove hidden mark-ups that once inflated energy prices.
- Targeted relief preserved: The Lifeline customers still enjoy free kilowatt-hours, no fixed fees, and below-inflation increases.
- Middle-class adjustment: Domestic users face a new fixed charge but benefit from capped energy blocks; their overall bump is smaller than national peers.
- High-end recalibration: Affluent households save on per-kWh costs yet pay steeper fixed charges, reflecting fuller use of network capacity.
- Foundation for the future: The unbundled design supports smart tariffs, renewables integration, and long-term fiscal health without burdening low-income users.
Cape Town’s 2025 tariff reset shows that municipalities can restrain price hikes while funding essential grid upgrades, if they confront hidden subsidies head-on, price services transparently, and ring-fence social support for those who need it most.
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