Eskom electricity price shock for South Africa with even bigger increases on the way
South Africans will face even larger electricity price increases in 2026 and 2027, after the National Energy Regulator of South Africa (NERSA) admitted to making a mistake in its assessment of Eskom price hike application earlier this year.
NERSA has now moved to correct information regarding the settlement agreement with Eskom on the Sixth Multi-Year Price Determination (MYPD6) for the 2025/26, 2026/27 and 2027/28 financial years.
The energy regulator originally approved the following increases and revenues for 2025-2027:
- Approved revenues of R384,610 million for the 2025/26 financial year, which translates to a percentage increase of 12.74%.
- Approved revenues of R409,524 million for the 2026/27 financial year, which translates to a percentage increase of 5.36%.
- Approved revenues of R436 860 million for the 2027/28 financial year, translating to a percentage increase of 6.19%.
However, Eskom lodged a judicial review of the Energy Regulator’s decision in line with a section of the National Energy Regulator Act of 2004.
Eskom looked to set aside the regulator’s decision, citing a revenue shortfall of R107 billion, which is the difference between what Eskom applied for and what was approved.
Eskom challenged the decision with respect to a revenue shortfall that occurred in the generation business due to a data input error.
This affected depreciation and the Regulatory Asset Base (RAB) value for the generation business.
Eskom sought relief via a judicial review, which would assess the validity of Eskom’s claims and determine whether NERSA could mount a sustainable opposition to the grounds of the review application.
NERSA and Eskom decided to negotiate rather than proceed with full legal proceedings. After assessing Eskom’s review application, NERSA identified several errors, specifically a depreciation error.
This resulted in a shortfall of R14.5 billion.
Another error relates to an asset transferred for commercial operation, where the cumulative balance principle (rolling forward) was not applied for the generation business, which affected the 2026/27 and 2027/28 financial years.
After rectifying these errors, NERSA said that Eskom was entitled to an additional R54 billion over the three-year MYPD6 period. This is far lower than Eskom’s original claim of R107 billion.
What this means for electricity prices
“The settlement between Eskom and NERSA can only be effective after it has been made an order of the court, which has not yet been secured, and which has been delayed to avoid pre-empting the decision of the courts.”
The disbursement of the R54 billion settlement amount will be phased as follows:
- R12 billion will be recovered during the 2026/27 financial year.
- R23 billion will be recovered during the 2027/28 financial year.
- The balance will be addressed in the next MYPD determination cycle.
Although there will be no additional price increases for the current financial year, the settlement agreement will result in the following price increases.
- For the 2026/27 FY, the additional increase will be 3.40 percentage points, resulting in a price increase of 8.76%.
- For the 2027/28 FY, the additional increase will be 2.64 percentage points, resulting in a price increase of 8.83%.
NERSA said that the phased approach will prevent immediate tariff shocks to consumers, while ensuring Eskom’s financial sustainability.
However, with inflation expected to be around 3.5% in 2025, these price hikes reflect a significant premium which will undoubtedly place households under even more financial pressure.
It also presents the risk of further shocks to inflation which will make the Reserve Bank’s goals of targeting a 3% rate even trickier.
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