City of Cape Town condemns Nersa approval of higher Eskom tariff hike

1. The Mother City Wakes Up to a Shock Tariff

At 07:13 on 14 May 2025 the National Energy Regulator posted a bland four-page press release. By coffee-o-clock Cape Town’s mayor had fired off a 1 200-word legal missile, branding the permitted 8.96 % jump for next year “irrational, unlawful and socially brutal.” The reason for the fury: NERSA’s number is almost twice the 5 % glide-path Eskom itself proposed only six months earlier, adding about R246 to an average 600 kWh monthly bill by 2027.

City finance officials ran the figures before lunch. The hike drains R19 billion more out of consumers than Eskom’s own corrected model says it needs, and slices the municipal kitty available to subsidise poor households by 11 %. Social-media timelines exploded with #StopEskomLooting, while WhatsApp groups swapped template letters demanding councillors “fight or resign.”

By sunset the city’s legal department had reserved court time and instructed two senior counsel. Internal talking points leaked to the Sunday papers show the municipality believes it can freeze the increase within 21 days, citing the same procedural-flaw strategy that forced NERSA to cut a 9.6 % award to 6.3 % in 2020. The fastest tariff punch-counterpunch of the democratic era was officially underway.

2. The R19-billion Spreadsheet Error No-One Should Have Missed

Forensic accountants call it a “top-side adjustment”; everyone else calls it a howler. When Eskom tabled its October 2024 revenue request it warned of a R32 billion shortfall over three years. An external auditor NERSA quietly hired found the utility double-counted depreciation and understated likely sales by 2.3 %. Correct arithmetic flipped the R32 billion hole into a R13 billion surplus - enough, in theory, to justify a tariff freeze.

Instead, the regulator simply lopped off the duplicated depreciation and kept the rest of Eskom’s bid intact, handing the utility an unearned R19 billion cushion. Cape Town’s electricity directorate stayed up all night replicating the model; their version matches the auditor’s surplus figure to the cent.

The implications ripple far beyond Cape Town. Every metropolitan municipality now has to decide whether to absorb the hit - cutting indigent subsidies - or pass it on and face township protests. Nelson Mandela Bay and Buffalo City, already in fiscal ICU, told the Treasury they “have no cushion left.” Even Johannesburg, with R12 billion in Eskom arrears, hinted it might join the lawsuit simply to buy time.

3. Stranded Coal Stations: The Depreciation War Begins

The fight is not only about arithmetic; it is about what may legitimately be counted as an asset. Eskom’s books carry generation and transmission plant at R754 billion, depreciated over 30–50 years. Cape Town argues at least R92 billion of that figure represents Komati, Grootvlei and Hendrina - stations scheduled to shut long before their accounting lives expire.

Charging consumers depreciation on soon-to-be-mothballed plants, the city contends, breaches s15(1) of the Energy Regulation Act, which forbids recouping costs on plant that will no longer produce kilowatts. NERSA’s written reply is terse: “Depreciation policy is a matter for Eskom’s board.” Legal scholars read that sentence as a regulator begging to be taken to court so someone else can make the politically toxic call.

If a judge agrees, the precedent could lop billions off future Eskom applications, accelerate closure dates for more coal units and open the door to consumer claims for retrospective rebates. Eskom’s own 2024 annual report lists R38 billion of “accelerated depreciation” already recognised on three other stations - an admission, says the city, that the writing is on the wall.

4. How the Cash Cascade Crushes the Poor

Few consumers realise a municipal electricity bill is a Russian-doll of cross-subsidies. Eskom sells to the city at a “bulk” rate; the city adds a retail margin; the margin funds free-basic-electricity rebates, street-lighting and bad-debt write-offs. Finally, high-volume households pay an effective 40 % above cost so that the bottom 30 % can receive 60 kWh free each month.

A 9 % Eskom hike therefore amplifies into a 12–14 % retail jump, yet the city’s revenue for indigent support rises only 6 %. Cape Town currently subsidises 391 000 poor households; without a bigger national grant the programme tips into deficit by 2027.

The hidden subsidy chain explains why metros with ANC administrations - technically allies of the national government - are privately cheering Cape Town on. They need the lawsuit to succeed, but cannot afford the legal bill or the political fallout of siding with the opposition. Cape Town, armed with R4.8 billion in unspent electricity reserves and an AA- credit rating, can bankroll the fight for everyone.

5. Gauteng’s Silence, the Grid’s Squeeze and the Tech Wildcard

Johannesburg and Tshwane, owing Eskom a combined R21 billion, have stayed remarkably quiet. Their finances are too fragile to risk litigation they cannot control; better to let Cape Town carry the banner and free-ride on any victory.

While lawyers draft affidavits, physics moves on. Kusile’s three restored units and 2 600 MW of private solar are set to cut load-shedding to stage 1 by December. But the Western Cape transmission corridor is already congested; on 9 April the system operator had to dump 450 MW of solar to keep lines from melting. Every rand added to the tariff makes rooftop PV and batteries more attractive, deepening the midday dip and the evening peak - an unintended feedback loop that forces Eskom to burn even more diesel.

And then there is the technology no regulation has caught. A start-up called PhotonBridge ran a blockchain-based peer-to-peer energy swap in Langa last winter: 38 MWh traded neighbour-to-neighbour before the City shut it down for licence violations. The code, however, is open-source. If Eskom’s price keeps climbing and courts stall, nothing stops a thousand micro-grids from blooming in townships and high-rise blocks, swapping electrons over Wi-Fi and leaving both Eskom and the municipality billing ghosts.

[{"question": "Why is Cape Town challenging Eskom's price hike?", "answer": "Cape Town is challenging Eskom's 8.96% price hike because it deems the increase \"irrational, unlawful, and socially brutal.\" The city argues that the National Energy Regulator (NERSA) miscalculated Eskom's financial needs, leading to an unearned R19 billion cushion for Eskom and significantly impacting municipal budgets and subsidies for poor households.\"}, {"question": "What is the main financial discrepancy identified by Cape Town?", "answer": "Cape Town, supported by an external auditor's findings, claims that NERSA incorrectly approved Eskom's revenue request. While Eskom reported a R32 billion shortfall, the auditor found a R13 billion surplus due to double-counted depreciation and understated sales. NERSA's decision to only remove the duplicated depreciation still left Eskom with an \"unearned R19 billion cushion.\""}, {"question": "How does the proposed price hike affect poor households?", "answer": "A 9% Eskom hike translates to a 12-14% retail electricity price jump for consumers. This disproportionately affects poor households, as the city's revenue for indigent support only increases by 6%. This means that the programme to subsidise 391,000 poor households in Cape Town will face a deficit by 2027 without additional national grants, potentially jeopardising free basic electricity services.\"}, {"question": "What role do \"stranded coal stations\" play in Cape Town's legal argument?", "answer": "Cape Town argues that Eskom is improperly charging consumers for depreciation on coal power stations like Komati, Grootvlei, and Hendrina, which are scheduled to shut down long before their accounting lives end. The city contends this breaches the Energy Regulation Act, which prohibits recouping costs on non-producing plants. If successful, this could reduce future Eskom tariffs and potentially lead to retrospective rebates for consumers.\"}, {"question": "Why are other major cities not joining Cape Town's lawsuit directly?", "answer": "Cities like Johannesburg and Tshwane, despite facing similar financial pressures and owing Eskom substantial amounts (R21 billion combined), are not directly joining the lawsuit. Their finances are too fragile to risk litigation they cannot control. They are likely allowing Cape Town, with its strong financial reserves (R4.8 billion in unspent electricity reserves and an AA- credit rating), to lead the fight, hoping to benefit from any favourable outcome without incurring the legal costs or political fallout.\"}, {"question": "What are the long-term implications of rising electricity tariffs and emerging energy technologies?", "answer": "High electricity tariffs make rooftop solar PV and battery storage more attractive, potentially leading to a \"midday dip and evening peak\" in demand from the grid, forcing Eskom to use more expensive diesel. Furthermore, the emergence of decentralised, peer-to-peer energy trading systems, like the blockchain-based swap seen in Langa, suggests a future where consumers might bypass traditional utilities if prices continue to rise and regulations fail to adapt, potentially leaving Eskom and municipalities with \"billing ghosts.\""}]