South Africa’s electricity prices are rising because the energy regulator, Nersa, made big mistakes in calculating how much money Eskom needs to run the power system. This error left Eskom short by over R100 billion, forcing a legal battle and a settlement that pushed tariffs up by nearly 9% a year. These higher costs hit families and businesses hard, making electricity less affordable and sparking frustration across the country. The problem reveals deeper issues in South Africa’s power system, showing how crucial it is to fix mistakes quickly and rebuild trust for a brighter energy future.
South Africa’s electricity tariffs are rising due to regulatory errors by Nersa that underestimated Eskom’s revenue needs by over R100 billion. A legal settlement increased tariffs by up to 8.83% annually to cover Eskom’s financial shortfall, impacting households, businesses, and the national economy.
Electricity sits at the heart of South Africa’s day-to-day existence, lighting up homes, powering industry, and shaping the tempo of urban and rural life. But when the machinery behind this energy system falters, the impact echoes from government boardrooms to the kitchens of ordinary citizens. This year, a complex interplay between South Africa’s national regulator, its troubled utility, and the law has placed electricity tariffs – and the very cost of power – back into the nation’s spotlight. Understanding the consequences means unpacking the story from every angle: technical missteps, legal battles, historic context, and the lived experience of every consumer.
Electricity regulation in South Africa is an intricate dance of numbers, projections, and oversight. The National Energy Regulator of South Africa (Nersa) carries the immense responsibility of determining just how much revenue Eskom, the state-owned power supplier, can collect each year. This figure, known as the “permissible revenue,” is not merely academic. It shapes the tariffs paid by households and businesses, determines cash flow for crucial infrastructure, and, ultimately, influences the nation’s economic pulse.
A routine regulatory process went awry when Nersa made multiple calculation errors in its revenue determination for the 2025 to 2028 period. The mistakes centered around the Regulatory Asset Base – which reflects Eskom’s total operational assets – and depreciation values, both of which directly influence how much revenue Eskom is allowed to generate. By underestimating Eskom’s requirements, Nersa inadvertently shortchanged the embattled utility by more than R100 billion, according to Eskom’s own audit.
Eskom, already wrestling with mounting debt and the challenge of constant maintenance, immediately recognized the magnitude of the discrepancy. The company did not merely protest through the usual channels; it escalated the matter to the High Court. Through a judicial review, Eskom sought to have Nersa’s revenue ruling overturned, arguing that such a substantial shortfall would threaten the stability of the national grid and undermine any hope of future sustainability.
Faced with the potential for drawn-out litigation and a mounting financial crisis, Nersa reconsidered its position. Rather than pursue a lengthy court battle, the regulator opted for a negotiated settlement. The result: Eskom would receive an additional R54 billion, spread over three years. Although this figure was roughly half of Eskom’s initial claim, it marked a massive upward revision – one that sent ripples across the energy sector and into the national economy.
The terms of the settlement forced Nersa to adjust the tariffs it had already set for the coming years. For the financial year 2026/27, the average increase in electricity prices jumped from 5.36% to 8.76%. The following year’s tariffs would rise by 8.83%, up from a previously planned 6.19%. While a few percentage points may seem modest, they translate into billions of rands – directly affecting household budgets, industrial costs, and the competitiveness of South African goods.
Nersa, aware of the potential backlash, chose to phase in the increases over several years. This approach aimed to prevent a sudden shock to consumers and the economy. Yet, even a staggered increase cannot fully insulate South Africans from the financial strain. The settlement, rooted in a technical correction, ultimately underscored a deeper reality: administrative missteps at the top trickle down to everyday life, reshaping spending habits, business forecasts, and the national mood.
To truly appreciate the impact of this regulatory blunder, one must consider the historic weight carried by Eskom and the broader electricity sector. Established in 1923, Eskom once stood as a beacon of progress and a symbol of South Africa’s industrial ambitions. Its expansion through the mid-twentieth century paralleled global trends, echoing the electrification drives of post-war Europe and North America. At its height, Eskom embodied the promise of affordable, universal access to power – a cornerstone of modern development.
However, decades of underinvestment, shifting political priorities, and managerial turbulence have left Eskom battered. Chronic underfunding has meant that power plants suffer from frequent breakdowns, leading to the infamous “load shedding” that now defines daily life in many parts of the country. The regulator’s miscalculation must be seen in this broader context: a fragile utility, weakened institutions, and a public increasingly skeptical of official competence.
Nersa’s regulatory framework, inspired by British and European models, aspires to balance Eskom’s need for financial viability against the imperative to protect consumers from runaway prices. The recent calculation errors, and the subsequent legal and financial fallout, highlight how even sophisticated systems are vulnerable to human error and bureaucratic inertia. The result is not just a technical problem, but a crisis of confidence in the institutions meant to safeguard the public interest.
Far from being an abstract debate about spreadsheets and court rulings, the consequences of this episode play out in the streets, homes, and businesses of South Africa. In Johannesburg’s suburbs, families like that of Thandiwe now light candles during their morning routines, bracing for yet another phase of load shedding. For many, electricity has shifted from an invisible utility to a daily preoccupation – its affordability and reliability never guaranteed.
Small business owners and manufacturers, too, recalculate their operating costs with every tariff announcement. For many, rising electricity costs threaten already slim margins, forcing difficult decisions about staffing, investment, and even survival. The effects extend outward, influencing the price of food, the cost of transportation, and the overall rhythm of commerce. As electricity tariffs rise, so too does the specter of inflation and economic hardship.
Public anger simmers as well. Each new increase in electricity prices is met with frustration and a growing sense of powerlessness. Many South Africans view the utility’s woes and the regulator’s mistakes as emblematic of broader governance challenges – where technical errors and political indecision converge, leaving ordinary people to foot the bill.
The legal battle between Eskom and Nersa, while ultimately resolved outside of a full court hearing, has broader implications for South Africa’s regulatory architecture. In admitting to its mistakes and settling with Eskom, Nersa invoked principles that lie at the heart of administrative law: transparency, accountability, and the willingness to correct course when errors come to light.
Legal scholars might liken this episode to landmark cases in Britain or elsewhere, where the courts established that even technical miscalculations can undermine the legitimacy of regulatory decisions. In this light, the Nersa-Eskom settlement stands as both a cautionary tale and a reminder of the ongoing need for vigilance, review, and reform within public institutions.
Looking forward, the episode poses hard questions: How can South Africa strengthen its regulatory capacity? What safeguards might prevent future errors from wreaking such widespread havoc? And, most critically, how can the nation rebuild trust in the very systems meant to ensure fairness, reliability, and progress?
South Africa’s electricity saga is far from over. The recent tariff debacle, rooted in administrative error but magnified by historic and structural weaknesses, underscores the complexity of managing a vast and vital system under strain. As households and businesses steel themselves for higher costs, the nation stands at a crossroads – forced to confront the consequences of past mistakes while searching for a path toward a more stable, affordable, and equitable energy future.
The numbers – R54 billion in new costs, tariff increases stretching into the next decade – are stark. Yet, beyond these figures lies a deeper story: one of resilience, adaptation, and the relentless effort to keep the lights on in the face of adversity. For South Africans, the true cost of power is measured not just in rands and cents, but in trust, opportunity, and the hope for a brighter tomorrow.
The electricity tariffs in South Africa rose primarily because the National Energy Regulator of South Africa (Nersa) made significant calculation errors when determining Eskom’s permissible revenue for 2025 to 2028. These errors underestimated Eskom’s financial needs by over R100 billion. To address this shortfall, a legal settlement required tariff increases of about 8.8% annually, leading to higher electricity costs for households and businesses.
Nersa’s underestimation meant Eskom was not allocated enough revenue to cover its operating costs and debt, threatening the utility’s financial stability. Eskom challenged the decision in the High Court, leading to a settlement where Eskom received an additional R54 billion over three years. This correction forced Nersa to increase tariffs beyond initial projections, impacting consumers through higher electricity bills and contributing to economic strain nationwide.
Eskom is South Africa’s primary electricity supplier and has historically been crucial for economic development and daily life. Its financial health ensures the stability and reliability of the national power grid. When Eskom struggles financially, it risks more frequent power outages (load shedding), delays in infrastructure maintenance, and higher costs, all of which affect households, businesses, and the broader economy.
Higher tariffs mean increased monthly electricity bills for families, putting pressure on household budgets, especially for low- and middle-income consumers. For businesses, especially small and medium enterprises, rising electricity costs reduce profitability and competitiveness, potentially leading to job cuts or reduced investment. Overall, these increases feed into inflation by raising production and transportation costs.
Eskom challenged Nersa’s revenue decision in the High Court through a judicial review, arguing the shortfall threatened the national power system’s stability. Rather than endure a lengthy legal battle, Nersa and Eskom reached a settlement. This outcome highlights the importance of transparency, accountability, and the ability of regulators to correct errors. It also serves as a reminder of the need for strong regulatory oversight to maintain public trust.
Improving regulatory capacity is critical – this includes better training, data accuracy, and oversight mechanisms within Nersa. Enhancing transparency and stakeholder engagement can rebuild public confidence. Long-term, South Africa must invest in Eskom’s infrastructure, diversify energy sources, and implement governance reforms to ensure financial sustainability and reliability. Strengthening these areas can help avoid costly errors and secure a stable electricity future.
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