City Power-Eskom dispute ends, but deeper cracks in SA's electricity distribution sector have been exposed

Daily Maverick

2 days ago

Though the deal between City Power and Eskom may have kept the lights on in Johannesburg, the real work of modernising Eskom and municipal electricity metering and billing systems has only just begun.
A high-stakes power play between Johannesburg's electricity distributor, City Power, and Eskom Distribution has reached a fragile settlement, ending a four-year, R4.9-billion dispute that has laid bare critical failings in South Africa's electricity distribution industry.
At the centre of the dispute was City Power's claim that Eskom had significantly overbilled it for bulk electricity supplied between July 2020 and September 2024. The dispute, which escalated into a protracted financial and technical standoff, led to an independent investigation and report by the South African National Energy Development Institute (Sanedi) ordered by Minister of Electricity Kgosientsho Ramokgopa.
City Power accused Eskom of overbilling amounting to R4.47-billion for electricity supplied at multiple intake points. Further claims included R323-million in alleged overcharges where Eskom estimations were said to have failed to factor in the effects of loadshedding, and another R91-million as a result of incorrect estimations for electricity supplied at intake points that lacked operational metering infrastructure.
Eskom rejected the allegations and insisted that 42 of the 49 intake points in Johannesburg were billed based on actual meter readings. Eskom further maintained that estimates were used only where vandalism or theft had compromised metering systems, and accused City Power of relying on incorrectly configured or missing check metering systems, and City Power's seriously flawed 'mock billing' practices.
The Sanedi report, finalised in January 2025 and now in the public domain courtesy of the Organisation Undoing Tax Abuse (Outa) following an application in terms of the Promotion of Access to Information Act, has delivered a damning analysis, particularly in respect of City Power's main claim, but also in respect of Eskom's estimating practices.
The findings
The Sanedi report supported Eskom's assertions that City Power's own check metering and mock billing practices were marred by inconsistent meter configurations, incorrect meter placements and gaps in data management – thus undermining the credibility and validity of the major portion of City Power's claims.
While Eskom's meters and associated billing were found to be generally accurate, Sanedi concluded that where estimations were unavoidable, Eskom relied upon its own internal estimating practices, rather than those of National Rationalised Specification (NRS) standards, which are jointly prepared and agreed to by both Eskom and municipal electricity distributors.
Importantly, when applying NRS 047-compliant estimation methods, Sanedi found that City Power had, in fact, been underbilled by Eskom by about 412GWh across the six largest metered intake sites. This finding completely undermined and refuted a major portion of City Power's claim against Eskom.
But the investigation also found that Eskom's internal processes of metering estimates fell short of the requirements of NRS standards and the distribution metering code, which require consultation by Eskom with the customer (City Power) during the estimation processes. The impact of load shedding was found to be another blind spot in Eskom's estimating model.
The recommendations
The Sanedi report has called for significant reforms.
City Power was advised to upgrade its check metering infrastructure and ensure alignment with the distribution metering code. Eskom, in turn, was urged to revise its estimation protocols in line with electricity distribution industry standards, and to improve the transparency and timelines of its processes for notified maximum demand applications.
Sanedi further required that adjustments be made by Eskom to account for average load reductions of 2.74% in 2022 and 10.85% in 2023 during the hours of load shedding, based on analysis across affected substations. These adjustments, the report argued, should be standardised and factored into estimating methodologies during future load shedding periods.
Perhaps most significantly, Sanedi called on the National Energy Regulator of South Africa (Nersa) to update metering standards and estimating procedures to reflect the realities of load shedding, and to ensure transparency, consultation and firm timelines by electricity distributors when estimating metering data at large supply points, and in applications for increases in notified maximum demand.
The settlement
After the finalisation of the Sanedi report, the parties reached a financial settlement of the dispute. City Power agreed to keep its current account up to date and to settle its R3.2-billion bulk supply arrears with Eskom over the next four years. For its part, Eskom agreed to waive R830-million in claims for surpassing notified maximum demand, interest and penalties.
Eskom has also indicated its willingness to assist City Power with extended payment terms for the months of June, July and August when high winter electricity prices are in effect. Sources also suggest that the settlement included rectification of metering infrastructure at key substations and a new protocol for data sharing and dispute resolution.
Though the deal has been publicly framed as a success, the underlying issues remain far from resolved. Many municipalities have reached settlement agreements with Eskom Distribution, and several have promptly defaulted again within months. It remains to be seen whether City Power and City of Johannesburg are able to meet their settlement commitments while keeping their current account with Eskom up to date.
The implications
The implications of this saga stretch well beyond Johannesburg and City Power.
Across South Africa, municipalities owe Eskom more than R100-billion – much of it clouded in similar disputes over metering integrity, billing transparency and infrastructure decay. This dispute has exposed a critical need for independent oversight of Eskom and municipal billing processes, and has prompted calls for a nationwide audit of distribution and metering systems.
Perhaps the most important lesson is the urgent need for a functional, standardised and enforceable framework governing the relationship between Eskom and its municipal distributors. Without this, South Africa risks deepening the cycle of financial instability, technical dysfunction and public distrust that has long plagued its electricity distribution network.
Conclusion
While this metering and billing dispute is now resolved, the technical and institutional weaknesses remain. The settlement may have kept the lights in Johannesburg on – but the real work of modernising Eskom and municipal electricity metering and billing systems has only just begun.
For now, the City Power – Eskom saga has ended with somewhat frosty handshakes and gritted teeth behind forced smiles. But unless systemic reforms are enacted, similar disputes may soon flare up in Tshwane, Ekurhuleni, eThekwini, Mangaung, Nelson Mandela Bay and beyond – each one delivering another blow to an already fragile electricity distribution industry. DM
Chris Yelland is managing director of EE Business Intelligence.