Eskom’s R30 billion ‘punishment’ for paying customers

Power utility Eskom wanted paying customers to cover R30 billion of its arrears debt, while writing off billions from energy users who refuse to pay.

This was blocked by the energy regulator Nersa in the latest MYPD6 application for the next three years.

Nersa has published its full documentation of reasons for its decisions to allow Eskom to hike electricity prices by 12.7% for 2025 and by 5.36% in 2026 and 6.19% in 2027.

While the regulator granted Eskom above-inflation increases to its tariffs, it was far less than what the power utility wanted.

Its original application was for a 36.15% hike in 2025, followed by 11.91% in 2026 and 9.1% in 2027.

As part of its deliberations and decision-making process, Nersa looks at every factor of the applied-for increase and decides which amounts to allow and which to reject.

A notable rejection for the MYPD6 was Nersa’s disallowance of any revenue to be collected by Eskom to address its arrears debt.

For the period, Eskom wanted to saddle its paying customers with an additional R30 billion of charges, which would have factored into the final approved increase, to address arrears debt.

The utility wanted to recover R8.9 billion in 2025, R9.9 billion in 2026 and R10.8 billion in 2027.

This would have had the effect of anyone paying their bills diligently covering Eskom’s losses from failing to collect from non-paying customers.

Nersa said that it would not be fair for paying customers to be charged with higher electricity prices and to carry the burden of those who are not paying.

This would be particularly egregious, given Eskom’s abject failure to stick to its previous collection commitments to Nersa.

Nersa said that it disallowed arrear debt to be included in the MYPD5 period as well, for similar reasons.

In the past, the regulator had adopted a 0.5% allowance as a provision for arrears debt. In direct terms, this means Nersa expected Eskom to have a 99.95% revenue collection rate, which is considered reasonable.

However, Eskom failed to collect 99.95% as per the provisions. In fact, Eskom’s debt collection levels have only deteriorated.

In its latest application, Eskom indicated that its projected payment level for 2025 is only 95%, and is expected to deteriorate to 91.7% by FY 2028.

Debt write-offs

Eskom is currently working with the National Treasury to deal with its mountain of arrears debt, particularly those owed by municipalities.

While the groups have launched a municipal debt relief programme, Eskom has lamented that it is not proving to be very effective.

The programme makes provision for municipal debts to be written off, provided they can meet certain requirements. No debt has yet been written off.

However, Nersa noted that Eskom has been writing off debts for non-municipal customers as well as for Soweto, the latter of which has seen R12 billion of its debts written off since 2015.

The utility applied for a further R2.8 billion in impairments related to Soweto between 2025 and 2028.

Eskom identified Soweto as a high credit risk area and has challenges collecting overdue amounts from customers.

The utility indicated that the initiative to convert post-paid meters to prepaid has assisted with reducing non-payment in Soweto, and this is supported by continued credit management enforcement for those remaining on post-paid.

Nersa said that none of the stakeholder feedback to Eskom’s MYPD6 application showed any support for allowing the utility to include arrear debt in its recoveries.

The regulator said that blocking arrear debt from the application would encourage Eskom to be more disciplined in its revenue recovery programmes and develop a more controlled financial environment.

Most notably, it would also put the utility’s focus on collecting debt from customers who owe it, rather than passing on the burden to paying customers through higher prices.