{"id":97452,"date":"2026-04-18T14:26:37","date_gmt":"2026-04-18T14:26:37","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs"},"modified":"2026-04-18T15:15:39","modified_gmt":"2026-04-18T15:15:39","slug":"eskom-contracts-from-30-years-ago-raise-electricity-costs","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs","title":{"rendered":"Eskom Contracts From 30 Years Ago Raise Electricity Costs"},"content":{"rendered":"<p><span style=\"color: #ff6600\"><strong>Africa-Press &#8211; South-Africa. <\/strong><\/span>Eskom\u2019s work to open up the market to supply it with coal and end historic cost-plus contracts signed pre-1994 has resulted in the utility no longer being a price maker but a price taker.<\/p>\n<p>This has translated into higher electricity production costs for Eskom, as the price it pays for coal has increased over the past decade.<\/p>\n<p>Electricity Minister Kgosientsho Ramokgopa explained that this should be a temporary phenomenon, with Eskom becoming a price maker once again after its operational recovery.<\/p>\n<p>Ramokgopa explained to the SABC that it was necessary for Eskom to end those historic contracts that ensured a relatively low and stable price for coal, translating into cheap electricity.<\/p>\n<p>This is because the ANC-led government saw it as a necessity to transform Eskom\u2019s coal suppliers by increasing the number of black-owned businesses.<\/p>\n<p>\u201cBy their very nature, evergreen contracts that were entered into pre-1994 had owners that were largely white,\u201d Ramokgopa explained.<\/p>\n<p>\u201cSo, if you want to introduce transformation, you need to open up for everyone, and that is the cost you are paying now.\u201d<\/p>\n<p>Ramokgopa explained that there shouldn\u2019t be tension between transformation and cheap coal and electricity, saying you can achieve both aims.<\/p>\n<p>\u201cYou can still continue with that historic cost-plus model, but insist on the ownership configuration being a certain type,\u201d Ramokgopa said.<\/p>\n<p>\u201cIn that you are achieving both your transformation objective and simultaneously resisting the rise in the cost of primary energy. You are still the price maker, and you pass it on to the end consumer.\u201d<\/p>\n<p>Ramokgopa said this is the model his ministry is proposing to help alleviate high electricity costs by returning Eskom to cost-plus contracts with coal mines that have undergone leadership transformation.<\/p>\n<p>Effectively, this would reverse Eskom\u2019s shift away from the cost-plus model it used before 1994, which created the world\u2019s cheapest electricity.<\/p>\n<p>Eskom\u2019s historic cost-plus deals with coal mines were key to South Africa\u2019s ability to produce electricity at extremely low prices in the late 1990s and early 2000s.<\/p>\n<p>The utility had the lowest price among all comparable electricity producers worldwide during this period, which spurred investment in heavy industry.<\/p>\n<p><b>Sacrificing efficiency for transformation<\/b><\/p>\n<p>Electricity Minister Kgosientsho Ramokgopa<\/p>\n<p>Eskom\u2019s cost-plus agreements with coal mines were extremely efficient, with Ramokgopa explaining how they saved the utility transport costs and gave it access to high-quality coal.<\/p>\n<p>One of Eskom\u2019s major challenges in the past was its vulnerability to coal price fluctuations, as coal exports were highly lucrative for South Africa.<\/p>\n<p>This led to tension among the utility, the government, and the coal mines, with foreign exchange earnings critical to the state and miners, but coming at the cost of energy security.<\/p>\n<p>Coal miners, which made billions by exporting coal, demanded that Eskom pay the same price that they would get in international markets.<\/p>\n<p>However, this would greatly increase the cost of producing electricity and potentially hobble the country\u2019s mining and heavy industry sectors.<\/p>\n<p>To resolve this, Eskom entered into cost-plus agreements with several coal mines to ensure its production costs were tied to the extraction and transportation of coal rather than to international prices.<\/p>\n<p>\u201cWhat has happened in the past is that Eskom would build coal-fired power stations at the mouth of a coal mine,\u201d Ramokgopa explained.<\/p>\n<p>\u201cYou would then transfer the coal via a conveyor belt to the power station, making it very cost-efficient for Eskom.\u201d<\/p>\n<p>These were evergreen contracts that effectively tied an Eskom power station to the operations of surrounding coal mines.<\/p>\n<p>Eskom would invest in expanding the operations of these coal mines and upgrading infrastructure to ensure their efficient operation.<\/p>\n<p>In turn, the miners would effectively impose a flat profit on the sale of coal to Eskom, tied to their operational costs, rather than charging the utility the international price of the commodity.<\/p>\n<p>This made Eskom\u2019s coal extremely cheap and, as an added bonus, high-quality, making it extremely efficient at producing electricity.<\/p>\n<p>However, Ramokgopa explained that these contracts and deals were largely sacrificed post-1994 to open up the market to new players outside of white-dominated cost-plus mines.<\/p>\n<p><strong>For More News And Analysis About <span style=\"color: #ff6600\">South-Africa<\/span> Follow <span style=\"color: #ff6600\">Africa-Press<\/span><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Africa-Press &#8211; South-Africa. Eskom\u2019s work to open up the market to supply it with coal and end historic cost-plus contracts signed pre-1994 has resulted in the utility no longer being a price maker but a price taker. This has translated into higher electricity production costs for Eskom, as the price it pays for coal has [&hellip;]<\/p>\n","protected":false},"author":84,"featured_media":97451,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5],"tags":[275],"class_list":["post-97452","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-south-africa-2"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.1 (Yoast SEO v27.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Eskom Contracts From 30 Years Ago Raise Electricity Costs - South Africa<\/title>\n<meta name=\"description\" content=\"Eskom\u2019s work to open up the market to supply it with coal and end historic cost-plus contracts signed pre-1994 has resul ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Eskom Contracts From 30 Years Ago Raise Electricity Costs\" \/>\n<meta property=\"og:description\" content=\"Eskom\u2019s work to open up the market to supply it with coal and end historic cost-plus contracts signed pre-1994 has resul ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2026-04-18T14:26:37+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-04-18T15:15:39+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2026\/04\/sm_1776512368.222798.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"675\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Eskom Contracts From 30 Years Ago Raise Electricity Costs\",\"datePublished\":\"2026-04-18T14:26:37+00:00\",\"dateModified\":\"2026-04-18T15:15:39+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs\"},\"wordCount\":700,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2026\/04\/sm_1776512368.222798.jpg\",\"keywords\":[\"South-Africa\"],\"articleSection\":[\"all news\",\"economy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/eskom-contracts-from-30-years-ago-raise-electricity-costs\",\"name\":\"Eskom Contracts From 30 Years Ago Raise Electricity Costs - 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