South Africans are set to face significant electricity price hikes in 2026 and 2027 after a secret R54 billion settlement between Eskom and the National Energy Regulator of South Africa (Nersa). The deal, a consequence of a major regulatory miscalculation, will force consumers to shoulder the cost of a R54bn blunder, adding further pressure to an economy already grappling with high living costs.
The tariff increases, expected to be nearly 9% for two consecutive years, are substantially higher than the previously announced figures. This comes after Eskom legally challenged Nersa’s initial multi-year price determination, which was found to contain a data error. The subsequent out-of-court settlement allows the power utility to recover the massive shortfall directly from its customers.
Energy analysts and business groups have heavily criticised the lack of transparency surrounding the agreement. The Energy Intensive Users Group (EIUG), which represents major industrial consumers like Anglo American and Glencore, stated that the “lack of transparency of the settlement leaves much to be desired,” especially concerning the implementation period which was decided without public consultation.
Mohamed Madhi, CEO at Sinan Energy, explained that the situation points to ineffective internal processes at the regulator. “You would assume that it’s checked and double-checked and triple-checked,” he said, highlighting the failure in oversight for a decision with such a widespread economic impact. Madhi also warned that the reality could be worse than projected, noting that historically, Eskom’s final price hikes often exceed initial forecasts.
SMread: Afghanistan earthquake crisis deepens as death toll rises
An unsustainable model
The core of the problem, according to experts, is Eskom’s unviable business model. The utility is caught between a continuously increasing cost base, burdened by massive debt, and a shrinking revenue base as more customers turn to alternative energy sources.
“With a shrinking revenue base, and an increasing cost base, I mean, it doesn’t take a genius to understand that this is not a viable business in the long term,” Madhi stated. He argued that unless Eskom is fundamentally restructured, South Africans can expect “high increases for the foreseeable future.”
Energy analyst Chris Yelland noted that the R54 billion is only part of the problem, with the total amount Eskom needs to recover from customers standing at R96 billion. “One way or another, we pay for these mistakes. Whether we pay as taxpayers, whether we pay as customers of electricity, we pay,” Yelland said.
The consistent price hikes have eroded South Africa’s global competitiveness. Madhi recalled that in the late 1990s, the country had “some of the cheapest tariffs in the world,” which spurred industrial growth. Today, prices are “extremely high” relative to peer nations, putting a “dampener on a number of investments.”
As consumers bear the brunt of the blunder, the only recourse appears to be reducing reliance on the national grid. Madhi advised that moving towards “grid independence” must become part of the financial planning for every household and business.
Image: Energy World
