CoCT's bold move to cut Eskom reliance by buying power from private traders
Cape Town moves to buy 500MW from private traders in bid to cut Eskom costs and curb rising electricity tariffs
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The City of Cape Town is moving to break its heavy reliance on Eskom, launching a plan to buy power from private traders in a bid to cut electricity costs and shield residents from rising tariffs.
The City has issued a tender to procure 500MW of electricity from licensed energy traders and aggregators, with bidders required to offer prices below Eskom’s Time-of-Use tariffs.
The move comes as the metro spends about 70% of its electricity tariff income on buying bulk power from Eskom, its single biggest cost driver.
It also comes as residents brace for higher bills. Eskom tariff increases of about 9% for municipal customers from July 2026 are expected to push up costs, with some estimates suggesting monthly increases of R200 to R300.
Against this backdrop, the City’s latest intervention is being positioned as both a cost-containment measure and a long-term strategy to shield consumers from escalating prices.
Mayoral Committee Member for Energy Xanthea Limberg said the tender marks a “pioneering step” to secure cleaner and more affordable electricity from the open market.
“This is the latest step we are taking to procure clean and affordable energy and reduce our reliance on Eskom’s very expensive power,” she said.
At its core, the plan signals a shift toward reducing reliance on Eskom, moving instead toward a more competitive electricity market involving private traders and aggregators.
Under the model, the City will appoint a panel of approved traders, who will then compete in a secondary bidding process to supply electricity through Power Purchase Agreements of up to 10 years.
Only traders licensed, or in the process of being licensed, by the National Energy Regulator of South Africa will be eligible, ensuring compliance and oversight.
The move also enables Cape Town to participate in the emerging South African Wholesale Electricity Market, where electricity can be traded more competitively.
The City has for several years pushed to diversify its energy mix to limit exposure to price shocks and supply instability.
That stance has increasingly put the metro at odds with regulators. Earlier this year, the City criticised decisions to approve Eskom tariff increases, arguing that consumers were being unfairly burdened.
Officials have warned that future Eskom increases could rise further in coming years, adding to pressure on households and businesses.
Eskom, however, says system performance has improved significantly, with more than 300 consecutive days without major supply interruptions and generation capacity consistently exceeding demand. The utility reported an Energy Availability Factor above 65%, alongside lower outages and reduced diesel use, even as municipalities push to curb rising costs.
While the tender aims to secure electricity at prices below Eskom’s tariffs, the benefits are unlikely to be immediate.
According to the tender specifications, successful bidders must begin delivering power within 36 months of signing a Power Purchase Agreement, meaning any relief for consumers is still years away.
Final pricing will be determined through a secondary competitive process among shortlisted traders, creating uncertainty over how much savings can ultimately be achieved. It remains unclear how much of any savings will ultimately be passed on to consumers.
The City has built in safeguards, including the ability to reject bids if pricing is not competitive or if market conditions change.
The procurement model relies on a panel system, where selected traders compete for work orders, with contracts awarded based on price and other criteria.
Bidders must demonstrate a track record in energy trading and generation contracts, meet regulatory requirements, and achieve a minimum functionality threshold before being considered.
Each agreement can run for up to 180 months, allowing the City to secure long-term supply while maintaining flexibility.
The 500MW tender forms part of Cape Town’s broader push to build a more resilient and diversified energy system, including increased use of renewable energy and private sector participation.
The City has already introduced measures to support small-scale embedded generation and alternative energy sources, as it seeks to reduce exposure to Eskom price hikes and improve energy security. Eskom has also moved to support rooftop solar adoption, extending a registration fee waiver for small-scale systems and introducing a prepaid option for residential users as part of efforts to integrate customer-owned generation into the grid.
Limberg said the latest tender reinforces Cape Town’s ambition to position itself as a leader in local government energy reform.
“These interventions underscore the City’s commitment to cutting energy costs and ensuring access to more affordable electricity for residents and businesses,” she said.
The tender closes at 10am on May 13, 2026, after which the City will evaluate bids and appoint a panel of traders.
Electricity procurement through the new system will then begin, with the first power deliveries expected within the next three years.