The National Energy Regulator of SA (Nersa) has handed Eskom a tariff increase less than half of what it requested but still far higher than the inflation rate.
The hike leaves a R250bn shortfall in the power utility’s top line over the next three years.
Nersa granted average tariff rises of 12.74%, 5.36% and 6.19% for the coming three financial years. Eskom asked for 36.15%, 11.81% and 9.1%.
‘We believe that this decision strikes a necessary balance between the needs of Eskom and the financial realities of consumers,” Nersa chair Thembani Bukula said in a statement.
The decision came after extensive consultation and 1,200 written comments from stakeholders. Concern was expressed about affordability, Eskom’s performance, municipal debt and the effects of negotiated price agreements.
Unemployment
The tariff hikes come at a time when the economy is hardly growing, plagued by high unemployment and entrenched poverty. Since 2010, households have had to cope with annual electricity tariff hikes averaging 15%.
Eskom has said for years that tariff increases do not reflect the cost of producing electricity. Alongside ballooning municipal debt, the tariff hikes could result in CEO Dan Marokane asking the Treasury for additional financial support.
Experts such as Peter Attard Montalto, MD of advisory house Krutham, and Coronation fixed-income head Nishan Maharaj raised the possibility of extra government bailouts once the R254bn debt relief package ended in 2025/26.
“We had thought formula could take you down to 20% odd and had expected an award of 18% but not much lower,” said Montalto. “Eskom will almost certainly appeal, but only get retrospective awards later down the line.” He said Eskom had to cut investment sharply in the coming year. The tariff decision confirmed the need for another year of bailout (2026/27).
Maharaj raised the possibility of the lower tariff award and mounting municipal debt necessitating further government assistance.
Electricity & energy minister Kgosientsho Ramokgopa welcomed Nersa’s announcement, acknowledging that it would put pressure on Eskom. and urged it to “stay the course with its investment strategy”.
Nersa set stringent targets for efficiency for Eskom, and plans to monitor them closely. It requires the utility to maintain a 75% energy availability factor in its generation fleet, rather than the maximum of 65% it applied for and to keep unplanned outages at less than 13%. Eskom put that at 23%-25%.
The regulator said that if Eskom met the targets it would remain sustainable and increase energy sales, rejecting Eskom’s assumption that its sales would continue to decline.
Nersa approved the capital expenditure the National Transmission Company SA (NTCSA) applied for without significant changes to support grid expansion and integration of renewable energy sources. But it required quarterly progress updates from Eskom on its capital projects. If there was substantial underspending, the regulator might reopen the tariff determination and reduce the allocation, said Bukula.
Nersa for the first time made separate revenue determinations for Eskom generation, the transmission segment, NTCSA and the distribution division. Distribution was the biggest loser with 26% of the revenue it requested disallowed. Generation got 18% less than it applied for and the NTCSA 18%.
Debtor arrears
The regulator disallowed amounts Eskom claimed to compensate partially for debtor arrears. Bukula said that legislation did not allow for that.
The DA said: “The increase afforded to Eskom is three times the national inflation rate and will put massive additional pressure on the prices of goods and services across the spectrum.” Eskom must be held accountable for operational inefficiency and financial mismanagement.
Bukula said the regulator would finalise Eskom’s application by the end of February. Then Eskom would seek approval for detailed tariffs for each consumer group from April 1. During this process it would become clear what bulk tariffs for municipalities would be. That would inform tariffs applicable in municipalities from July 1.
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