Energy

More electricity price pain for South Africans

The National Energy Regulator of South Africa (NERSA) has approved a 12.7% increase in Eskom’s electricity tariffs for the 2025/26 financial year.

This equates to an allowable revenue of R384 billion, which is significantly less than the 36.15%, or R446 billion, that Eskom requested.

In addition, NERSA announced that it approved the following tariff hikes for the next two years:

  • 2026/27 – allowable revenue of R409 billion, translating into a 5.36% increase 
    • Eskom requested an 11.81% increase
  • 2027/28 – allowable revenue of R435 billion, translating into a 6.19% increase
    • Eskom requested a 9.10% increase

The 12.7% increase for the 2025/26 financial year will come into effect on 1 April 2025.

NERSA chairperson Thembani Bukula said the organisation’s challenge in regulating the electricity industry has always been and still remains “the delicate balancing of the often conflicting requirements of all of the stakeholders”.

“We must ensure that Eskom is sustainable in the short and long term. At the same time, we’re required to ensure that the electricity services that Eskom provides are affordable,” he said.

“This is never an easy task, for inevitably, it is also influenced not just by our methodologies and rules but also by the greater economic environment locally and internationally.”

“We remain guided and directed by the policies and legislations of this country.”

While these increases are less than what Eskom requested, they will still translate into South African consumers paying significantly more for electricity.

Since 2007, electricity prices in South Africa have risen by 927% – far above inflation. The increases NERSA approved will, therefore, see that number grow even larger.

This incredible rise in prices has priced many South Africans out of being able to afford electricity. However, these high price hikes also present a threat to Eskom.

While many households switched to rooftop solar and other alternative energy sources over the past few years to avoid Eskom’s power cuts, many also saw it as a way to avoid the utility’s high prices.

This has seen Eskom’s sales steadily decline over the past decade, putting pressure on the utility to raise prices to ensure its revenue growth can cover increased operating costs. 

This can result in a death spiral for the utility, where its raised prices force customers to find alternative energy sources, necessitating even more price hikes to avoid a loss.

Energy analyst Chris Yelland previously warned that the consequences to Eskom are increasing levels of non-payment by municipalities who cannot collect the money from people who cannot afford to pay, debt and non-payment.

Earlier this year, Yelland told Daily Investor that Eskom’s sales have been under pressure for over a decade due to a variety of factors. 

The utility’s sales have steadily declined as the South African economy has slowed down and the price of electricity has gone up.

These factors have combined to result in South Africa’s energy intensity declining. This means that it now takes less energy to create a unit of GDP in 2025 than it has previously. 

Historically, the South African economy was dominated by energy-intensive industries such as mining, quarrying, smelting, and heavy manufacturing. 

This was driven by the extremely cheap electricity Eskom was able to supply, giving South African mineral and manufacturing exports a competitive advantage in the global marketplace. 

The decline in South Africa’s energy intensity is due to a shift in the economic landscape and the rising price of electricity, which is making energy-intensive industries economically unviable.

This threatens the utility’s economic viability as many of these consumers are not only heavy electricity users but also good customers in the sense that they pay on time and are reliable. 

If they are no longer customers of the utility, then Eskom risks being left with relatively smaller users of electricity who are unreliable when it comes to paying the utility.

Yelland said this will force Eskom to reinvent itself to remain competitive as South Africa marches towards a competitive electricity industry. 

He explained that the company will have to become vastly more efficient and reduce its operation costs to compete with cheaper new technologies. 

“We are busy creating a competitive electricity market. There is a new Electricity Regulation Act which allows for an open market and that is going to be the new playing field,” he said. 

“The whole intention is to take away the Eskom monopoly because it is failing us. We can see Eskom losing its monopoly and its 95% share of the generation market.”

Yelland said the future electricity generation industry is likely to consist of Eskom’s generation unit alongside a mix of municipalities, businesses, and households generating their own electricity.

“The future of electricity generation is a diversified, competitive sector, and Eskom is going to lose market share. That is good because, at the moment, the risk is too high, and Eskom is failing us.”

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