Eskom's Removal of the Wheeling Affordability Subsidy Credit: What C&I Off-Takers Must Reprice Now

The Credit That Quietly Disappeared — And the Bill C&I Off-Takers Are Now Carrying

For years, commercial and industrial (C&I) off-takers participating in third-party wheeling arrangements on the Eskom network enjoyed a structural pricing advantage they rarely had to think about: the affordability subsidy credit. Baked into the Gen-Wheeling and Gen-Offset tariffs, it effectively subsidised the cost of wheeled energy relative to standard Eskom retail rates. That advantage is now gone — and the repricing implications are substantial.

On 11 March 2025, NERSA approved Eskom's Financial Year 2026 tariffs, incorporating both the annual price increase and a sweeping restructuring of the tariff architecture. Central to the wheeling changes was the removal of the affordability subsidy credit for wheeled energy, requiring wheeling customers to fairly contribute to inter-tariff subsidies. The structural change took effect from 1 April 2025, when Eskom direct customer tariffs increased by 12.74%, with municipal bulk purchase tariffs following at 11.32% from 1 July 2025.

Now, entering FY2027, the compounding effect of that structural reset is fully visible on C&I energy bills — and many off-takers are only now realising that their Power Purchase Agreement (PPA) economics were modelled on a grid cost baseline that no longer exists.

What the Affordability Subsidy Credit Actually Did

Under the old tariff structure, wheeling customers received a credit against their Eskom account based on the Wholesale Electricity Pricing System (WEPS) rate. Full tariff charges were payable for all energy through the Eskom meter, with a separate service agreement raised on the customer's account to subtract the wheeled energy at an energy rate excluding losses under the Gen-Wheeling tariff. This was implemented via the billing system where the customer still received their bill for 100% of consumption, followed by a credit for the wheeled energy based on the TOU energy charge less losses.

Embedded within that credit was the affordability subsidy — a cross-subsidy that had historically been funded by non-local-authority tariff customers to support residential Homelight users. The affordability subsidy charge is defined as the transparent charge indicating socio-economic subsidies related to the supply of electricity to residential tariffs, payable by non-local authority tariffs on total active energy sales. When wheeling customers received this as a credit, they were, in effect, being partially shielded from a cost that direct Eskom customers had always paid. Eskom's Retail Tariff Plan (RTP) ended that arrangement.

The Hard Numbers: A Near-Doubling of Wheeling Grid Costs

The quantum of this change is not marginal. The cost of wheeling energy for connections between 500 V and 66 kV increased from approximately R0.31/kWh in 2024–2025 to R0.63/kWh in 2025–2026. If the increase had been driven solely by the approved 12.7% escalation, charges would have been approximately R0.34/kWh. The gap between R0.34 and R0.63 is the structural reform surcharge — the price of removing the subsidy credit and introducing new charges simultaneously.

Removing the affordability subsidy credit for wheeling customers alone raises energy charges on wheeled energy by approximately R0.24/kWh, prior to accounting for distribution losses. That figure, a single line-item change in the tariff schedule, exceeds the entire pre-reform wheeling grid cost for many medium-voltage off-takers.

The distribution loss factor change compounds the pain further. Distribution loss rates for connections between 500 V and 66 kV increased from 9.6% to 15.6%, effectively increasing the cost of using the grid by approximately 6%.

The Legacy Charge and the GCC: Two More Moving Parts

The subsidy credit removal did not arrive alone. A legacy charge was introduced, separating subsidy costs from early REIPPP rounds from the Wholesale Electricity Prices (WEPS). This charge is not avoided when wheeling — meaning off-takers absorb costs associated with Eskom's early renewable procurement obligations regardless of whether they are buying from Eskom or from a private IPP.

The remaining portion of the Generation Capacity Charge (GCC) is included and recovered through the energy charge. To ensure that all customers contribute to this charge, the portion of the GCC included in the energy charge is excluded from the energy credit provided under wheeling and net-billing transactions. In other words, off-takers cannot wheel their way out of paying for Eskom's generation capacity backstop — by design. The GCC phase-in stands at 20% in FY2026, rising to 30% in each of the subsequent two years, meaning the full structural reform extends into the tariff cycle beginning April 2028.

FY2027: A Further 8.76% Layered On Top

With the structural reset now embedded in base tariffs, annual escalation resumes on that new, higher floor. Eskom implemented an average electricity tariff hike of 8.76% for customers supplied directly by the utility from 1 April 2026, following NERSA's decision. The increase to 8.76% came after NERSA corrected errors in its earlier tariff determination, which had initially set the rise at 5.36%. The following year's increase will amount to 8.83% rather than the previously announced 6.19%, as the additional R54 billion granted to Eskom by NERSA is phased in.

Municipal bulk purchasers will implement their own tariff increases averaging 9.01% from 1 July 2026. For C&I off-takers connected through municipalities — a significant portion of the mid-market wheeling segment — the effective grid cost increase is therefore a compounding of the FY2026 structural shock plus FY2027 escalation, with further increases signalled through FY2028.

What Off-Takers Must Reprice Now

From SolarXgen's project experience across the Gauteng, Western Cape, and KwaZulu-Natal industrial corridors, the contracts most exposed are those signed in 2022–2024, when PPA levelised costs were modelled against pre-reform wheeling grid costs. Three categories of repricing are now urgent:

• PPA avoided-cost benchmarks: If your PPA's economic case was premised on a wheeling grid cost of R0.31/kWh, your internal rate of return has already deteriorated. The new grid cost floor at medium voltage has effectively narrowed the avoided-cost advantage of wheeled renewables. Off-takers must rerun financial models using the current WEPS excluding losses rate and post-reform loss factors.
• Legacy charge pass-through: PPAs that did not anticipate the introduction of a non-avoidable legacy charge will see unanticipated cost seepage. Review whether your agreement allocates this risk to the generator, the trader, or the off-taker.
• TOU mismatch exposure: The wheeling energy refund (WER) is calculated monthly as the sum of the lower of active consumed energy or wheeled energy for each TOU period, multiplied by the Gen-Wheeling tariff rate for that period. Off-takers whose consumption profiles have shifted — through operational changes, load-shedding-driven demand suppression, or BESS deployment — may be receiving less credit than anticipated. A TOU audit against actual generation dispatch is now essential.

The Case for Behind-the-Meter BESS Intensification

Energy-intensive users capable of generating electricity behind-the-meter, particularly when paired with onsite storage, can enhance overall grid resilience and optimise energy cost efficiency compared to both Eskom tariffs and wheeled energy from private sources. Although Eskom's RTP aims for a fairer and more transparent tariff structure, energy-intensive users will face significant changes in electricity costs and renewable energy project savings.

The regulatory direction is clear: wheeling remains a viable decarbonisation mechanism, but the era of low-friction, subsidy-cushioned grid arbitrage is over. A well-defined tariff structure ensures equitable cost recovery, eliminates unintended cross-subsidies, and facilitates the responsible integration of alternative energy sources. That is the regulator's stated intent — and it means the economics of wheeled renewable energy must now stand on their own merits, without subsidy scaffolding.

For SolarXgen clients, this is the decisive moment to pursue hybrid structures: larger behind-the-meter solar-plus-BESS installations that minimise grid dependency, supplemented by wheeling for residual demand. South Africa's wheeling framework has matured rapidly, and trader-led aggregation models now enable portfolios of renewable generation, backed by battery storage, to deliver shaped and dispatchable supply to large off-takers. The question is no longer whether wheeling works — it is whether the PPA economics were modelled correctly for the tariff environment that exists today.

Action Items for C&I Finance and Procurement Teams

• Audit all active wheeling PPAs against the FY2026 and FY2027 WEPS excluding losses rates and revised distribution loss factors.
• Request a TOU energy reconciliation from your wheeling service provider or Eskom account manager for the period April 2025 to present.
• Model BESS augmentation scenarios to quantify the reduction in wheeled energy dependency and exposure to ongoing tariff escalation.
• Review force majeure and tariff change provisions in existing PPAs — determine whether the FY2026 structural reset qualifies as a trigger event for contract renegotiation.
• Engage now with the FY2028 GCC phase-in: the 30% GCC contribution rate applicable in FY2027 and FY2028 will further adjust wheeling credit rates. Model this forward curve before signing any new long-term agreements.

The affordability subsidy credit was always a temporary artefact of an unreformed tariff structure. Its removal is not a surprise — it is the market sending a delayed but unambiguous price signal. The off-takers who act on that signal now, by repricing their energy stack and deepening behind-the-meter investment, will be best positioned for the fully unbundled electricity market that is already taking shape.

— SolarXgen Editorial, April 2026