South Africans to pay for R76 billion mistake
South Africans could soon be paying for what amounts to a R76 billion regulatory mistake as electricity consumers face another sharp tariff shock if proposals now before the energy regulator are approved.
According to energy expert Matthew Cruise from IMPOWER, consumers have been given very limited time to respond to a consultation paper published by the National Energy Regulator of South Africa (NERSA) on 30 December.
The paper proposes that electricity users compensate Eskom for errors made by the regulator itself. Cruise explained that the timing and structure of the consultation have raised serious concerns.
He noted that the process also excludes the usual in-person public hearings, which are typically used to test and challenge complex tariff decisions.
Additionally, the consultation paper effectively shifts responsibility onto the public. Cruise said that the document appears designed to justify why Eskom could be owed even more than previously expected, moving the figure from R54 billion to as much as R76 billion.
“I read every word of it to wrap my head around what’s going on,” he said.
According to Cruise, Eskom argued that NERSA had incorrectly failed to account for about R107 billion in depreciation and other costs when applying its own multi-year price determination methodology.
Eskom correctly identified that NERSA had not followed the methodology it had itself set out. Cruise said that both NERSA and the High Court later confirmed that mistakes had been made.
Following this, NERSA and Eskom entered into behind-the-scenes negotiations and settled on R54 billion, before AfriForum and the Minerals Council intervened.
“They said this is heavily impactful on the public and it needs to go through a public participation process,” he explained.
That intervention has now reopened the issue, with the revised figure rising even further. Breaking down the R76 billion, Cruise said around R62 billion relates to depreciation, which he described as particularly worrying.
“This is the depreciation of assets like power stations,” he said, adding that many of these plants were built at costs three times higher than initially budgeted.
He warned that these inflated costs are now “biting us” and have been a recurring issue for more than a decade.
“For the last 15 years, Eskom has been telling NERSA they’re not calculating depreciation correctly,” Cruise said.
“One would think after 15 years, NERSA would have gotten it right, but it seems like we’re still getting it wrong.”
A further R12 billion relates to returns on Eskom’s asset base, which Cruise said again highlights weaknesses in regulation.
Asked what this says about NERSA’s role, Cruise said feedback from industry experts suggests the regulator is struggling.
“They’re understaffed and under-facilitated to perform the function they’ve been given,” he said.
That function, he stressed, is to prevent electricity prices from escalating excessively and to protect the economy from Eskom’s repeated requests for steep increases.
“The regulator is meant to regulate and, in some sense, punish Eskom for excessive spending,” Cruise said.
“Eskom can’t just ask for all the money it’s wasting to be recouped from electricity payers through tariffs.”
However, he added that Eskom routinely pushes back, arguing it is owed the money regardless.
Cruise warned that the outcome of the consultation could have immediate consequences.
“Come 1 April, whatever tariff increase is agreed to will come into effect,” he said, with Eskom customers paying from April and municipal customers from July.
If the R76 billion is approved, Cruise said electricity tariffs could rise by around 10% to 10.5% this year and next, compared with about 8.8% under the earlier R54 billion proposal.
That would mean average increases of around 15% a year over five years.
Without the additional R76 billion, Cruise noted that the tariff increase for 2026 would have been just 5.36%.
He also warned that relief measures for energy-intensive industries would ultimately shift the burden back onto ordinary consumers.
“If Eskom is told to sell power cheaper to the steel industry, they’ll simply recoup that money from the rest of electricity payers,” he said.
“Unfortunately, it comes back to households and businesses that are already under severe strain.”
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