Draft Revenue Application Submitted to Nersa
Eskom’s price hike request, which includes a 36.15% increase in electricity tariffs for the 2025/26 financial year, has been submitted as a draft revenue application to the National Energy Regulator of South Africa (Nersa). However, the increase remains uncertain as Nersa awaits Eskom’s final submission.
Potential Changes to Eskom’s Tariff Application
Nersa emphasized that Eskom’s proposed tariff increase is not yet final and could be subject to adjustments. Once Eskom submits its final application, Nersa will adhere to its regulatory processes, which include publishing the application on its website, facilitating a thorough public participation process, and conducting public hearings to gather stakeholder and public input.
Details of the Proposed Price Increases
A confidential draft document submitted to Nersa revealed Eskom’s planned electricity price increases for the financial years 2026 to 2028. The power utility is seeking a 36.15% increase for direct customers starting 1 July 2025. However, municipal customers, supplied by local power utilities, could face an even steeper hike of 43.55%.
Specifically, Eskom requested the following tariff increases:
- 2025/26: 36.15% for non-municipal customers and 43.55% for municipal customers.
- 2026/27: 11.81% for non-municipal customers and 3.36% for municipal customers.
- 2027/28: 9.10% for non-municipal customers and 11.07% for municipal customers.
Eskom anticipates that these increases will allow it to generate R446 billion in revenue by 2026, R496 billion by 2027, and R537 billion by 2028. The utility attributes the need for these price hikes to the delayed implementation of South Africa’s renewable energy program, which has forced it to rely heavily on its coal-fired power stations to meet the country’s energy demands.
Nersa’s Recent Decision on Eskom’s Revenue Recovery
During a public meeting on 30 July 2024, Nersa dealt a blow to Eskom by eliminating nearly R16 billion from the utility’s application to recover lost revenue, approving only R8.1 billion. Although Eskom did not receive the R23.9 billion it had requested, the funds allocated in the Regulatory Clearing Account (RCA) still indicate that consumers can expect substantial price hikes in the coming years.
Understanding the Regulatory Clearing Account (RCA)
The RCA plays a crucial role in South Africa’s electricity tariff methodology. It records the balance between the actual revenue Eskom earns and the amount Nersa has approved. The account also tracks uncontrollable costs and revenues, allowing Eskom to apply for recovery if it overspends or to return funds to customers if it underspends.
Given Eskom’s significant debt and poor financial performance in recent years, the RCA has often shown that the utility is unable to cover all its expenses. Consequently, Eskom has consistently applied for higher tariff hikes, which Nersa typically reduces, effectively deferring the financial burden to a later date through the RCA.
Impact on Consumers
Nersa has indicated that the approved RCA balance will be recovered from standard tariff customers, local Special Pricing Arrangement (SPA) customers, and international customers. As a result, South Africans should brace for continued increases in electricity prices as Eskom seeks to address its financial challenges.
Conclusion
Eskom’s proposed electricity price hike is still under review, with Nersa set to follow a rigorous process that includes public consultation before any final decision is made. While the utility aims to secure higher revenues to manage its financial strain, consumers are likely to face significant increases in their electricity bills over the next few years.
