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Consumers who were relieved that the National Energy Regulator of South Africa (Nersa) did not allow Eskom’s 36% tariff increase or the 18% analysts expected must still contend with the fact that the 12.7% increase is three times the inflation rate.
In addition, analysts expect that Eskom will simply try to offset the rest of the increase it wanted by getting another bailout from National Treasury.
Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse (Outa), says Outa is also somewhat relieved that the Eskom electricity tariff increases approved by the Nersa are not as high as initially feared.
“However, the increase of 12.74% from 1 April 2025 (followed by 5.36% in 2026 and 6.19% in 2027), is still three times that of inflation and comes on the back of grossly inflated electricity hikes over the past 15 years, which has made the price of electricity out of touch with the economic realities of South Africans.
“While we expected Nersa to keep to the past traditional minimal reductions and approve an even higher increase, the reality is that this hike is still far too much for consumers and businesses already struggling to keep the lights on.”
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He points out that electricity tariffs have more than doubled since 2020. “Nersa’s approval means that the average standard tariff for Eskom customers will increase from 195.95 cents per kilowatt-hour (c/kWh) to 220.92c/kWh on 1 April, an increase of 12.74%.
“By 2027, this figure will further escalate to 247.16c/kWh. Since April 2020, the average price of electricity has doubled from 110.93c/kWh, placing a massive burden on already stretched consumers and businesses.”
This is the average standard tariff and Eskom has also submitted its retail tariff plan to Nersa, which details the different tariffs and is required to ensure that Eskom’s overall revenue does not exceed the amount Nersa approved.
Therefore, Duvenage says many tariffs will be higher than the average. “The price Eskom will charge municipalities for bulk supply in that tariff plan must still be set, and the municipalities must then set their own tariffs – also to be approved by Nersa – to implement from July.
“For the average household, this means significantly higher monthly electricity bills, placing further strain on struggling consumers. These hikes far outstrip inflation and come at a time when the country is grappling with economic hardship.”
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Duvenage says Nersa should have been far more forceful in applying the brakes to Eskom’s price hikes over the past 15 years but instead did not hold them to account for their runaway costs and controllable expenses, which gave rise to around 500% increases since 2008.
“Doing so now to some extent is therefore somewhat welcomed, but this does not undo the damage that Nersa has allowed to happen for too long.”
He also points out that on the eve of the tariff decision, the auditor general warned that tariff increases alone would not improve Eskom’s financial viability unless they are accompanied by dramatic improvements in revenue management and controls.
She also raised concerns about the unintended consequences of these hikes, including an increase in municipal debt and illegal connections due to affordability constraints. Her report identified serious governance failures at Eskom, including:
“Nersa must explain if it considered these alarming findings when approving yet another price hike. Why should South Africans keep paying more when billions are lost to fraud, theft and the management of Eskom, who have known what was happening with these ghost vending losses for years, did nothing to halt the practice until recently?”
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Duvenage says Outa maintains that Eskom and Nersa should focus on real solutions to reduce the cost of electricity rather than continuously increasing tariffs to compensate for inefficiencies. He says Eskom’s financial woes are driven by excessive primary energy costs, overstaffing and inefficiencies, the municipal debt crisis and corruption and mismanagement.
“Government should be holding municipalities accountable for their unpaid debts, instead of making law-abiding citizens and businesses foot the bill. Nersa’s job is to regulate in the interest of the public, yet year after year, it approves price hikes without addressing the underlying issues of Eskom’s financial mismanagement.”
Chris Yelland, managing director of EE Business Intelligence and an expert on electricity, says he actually expected that the increase would be around 18% and therefore the 12.7% increase was welcome news to him.
“However, the 12.7% increase is still three times the inflation rate and therefore a very, very high increase. But I have a strong feeling that Eskom will go to National Treasury or another player which they think has money if they cannot get the money they need from the customer.”
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Yelland says Eskom will simply approach Treasury for another bailout which will in effect be getting money from the tax payer. I believe it is time that the National Energy Regulator (Nersa) and Treasury to send a very strong message to Eskom that it is time for tough love.
“I believe they must send Eskom a really strong message to sort these matters out and get its act together. In her presentation to the portfolio committee on Wednesday the auditor general had some very strong words about Eskom about its business systems failing and the problems with ghost vending of electricity.”
“Eskom did not do many of the things it should have done in terms of improving its performance and efficiency. Eskom did improve its operational performance in terms of load shedding but Treasury should not be a soft target for Eskom.
“When Eskom does not get the high increases it wants from Nersa, it runs to Treasury for a bailout. Nersa and Treasury should now take a tough line on Eskom and I know it will be very hard, but unless you put enough pressure on them, they do not do what they are supposed to do.”
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Professor Raymond Parsons, an economist at the NWU Business School, says although it is still painful for businesses and consumers, the Nersa decision to allow a much lower 12.7% Eskom electricity tariff increase is a significant outcome.
“Nersa recognised the critical inputs it received last year from extensive public hearings on Eskom’s original massive application and its potential socioeconomic impact.
“The usual cost-plus approach to Eskom finances has therefore now been considerably ameliorated. But even at a 12.7% Eskom tariff hike allowance must also be made for the additional municipal surcharges that usually follow such tariff rises. Therefore, the electricity costs of doing business will inevitably increase later this year.”
He says higher electricity tariffs will nonetheless also encourage the search for alternative energy options and further lessen dependence on Eskom. Therefore, he believes the Nersa decision does not resolve the much bigger challenge of how Eskom is to be properly financed in the longer term and how soon its present restructuring will facilitate more viable outcomes for the troubled state-owned enterprise.
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