Eskom gets R54 billion ‘gift’ from higher electricity prices

The National Energy Regulator of South Africa (Nersa) has reached a settlement agreement with Eskom on the Sixth Multi-Year Price Determination, with the utility set to receive an additional R54 billion in revenue. 

This is due to various errors from Nersa in assessing Eskom’s review application, which underestimated certain components of the document. 

The settlement will result in higher electricity prices for the 2026/27 and 2027/28 financial years. 

These errors were identified after Eskom lodged a judicial review of Nersa’s decision to grant it revenues of R1.23 trillion for the next three financial years under the Sixth Multi-Year Price Determination. This is outlined below –

• Revenue of R384.6 billion for the 2025/26 financial year, translating into an increase of 12.74%
• Revenue of R409.5 billion for the 2026/27 financial year, translating into an increase of 5.36%
• Revenue of R436.9 billion for the 2027/28 financial year, translating into an increase of 6.19%

Eskom sought to set aside Nersa’s decision, citing a revenue shortfall of R107 billion. This is the difference between what Eskom applied for and what the regulator had approved. 

The utility challenged Nersa’s decision with regard to a revenue shortfall that occurred in its generation business due to a data input error, which affected depreciation and the Regulatory Asset Base (RAB) value. 

In a media statement, Nersa said the relief Eskom sought through the judicial review was assessed to evaluate the validity of the utility’s claims and to determine whether the regulator could mount a sustainable opposition to the review application.  

Nersa said it also considered Eskom’s requested reliefs in relation to their potential impact on customers and the broader economy, taking into account the public interest.

Ultimately, Nersa decided not to oppose the application and chose to engage in negotiations with Eskom rather than pursue legal action. 

After reviewing the founding papers, both parties decided to engage in settlement negotiations to resolve the issues in a manner that would not compromise the interests of Eskom and customers. 

Nersa also closely considered Eskom’s review application and the various errors pointed out by the utility in the Multi-Year Price Determination. 

During this review, Nersa identified several errors that resulted in an underestimation of certain components of Eskom’s application. 

Specifically, it identified an error in the depreciation amount. This resulted in a shortfall of R14.5 billion in revenue for the utility. 

The other error relates to an asset transferred for commercial operation, where the cumulative balance principle was not applied for the generation business, which affected the 2026/27 and 2027/28 financial years. 

After rectifying these errors, Nersa concluded that Eskom is entitled to an additional R54 billion over the three-year period, substantially lower than Eskom’s original claim of R107 billion. The parties settled for R54 billion on 30 July 2025.

Impact on electricity prices

Nersa outlined how the disbursement of this R54 billion settlement would be phased in, with the additional revenue to be collected across the three financial years. 

R12 billion will recovered during the next financial year, 2026/27, and a further R23 billion will be recovered in the 2027/28 financial year. Nersa said the balance will be addressed in the next Multi-Year Price Determination cycle. 

This means there will be no additional price increase for the current financial year. However, the settlement agreement will have the following estimated price impact for the following two years –

• For the 2026/27 FY, the additional increase will be 3.4%, resulting in a price increase of 8.76%.
• For the 2027/28 FY, the additional increase will be 2.64%, resulting in a price increase of 8.83%.

Nersa said the settlement agreement represents a fair and balanced resolution, while avoiding costly litigation between it and Eskom. 

However, it has quickly come under fire from energy expert and EE Business Intelligence managing director Chris Yelland. 

In a social media post on 27 August, Yelland slammed the settlement, calling it “absolutely astounding” and saying Nersa should rather be focusing on clawing back Eskom’s additional costs in the form of reduced tariffs going forward. 

“A mere R54 billion error by Nersa to be reversed in Eskom’s favour. It’s absolutely astounding,” Yelland said. 

“Bearing in mind the massive, undeclared, imprudently and inefficiently incurred costs that Eskom has passed through to customers in the tariffs in the past 10 years.”

“Actually, NERSA should be clawing back these costs on behalf of electricity customers in the form of REDUCED electricity tariffs going forward.” 

Yelland explained that the error would amount to a significant increase in consumers’ electricity prices. 

“Eskom’s revenue in the 2024/25 financial year is expected to be about R300 billion, so the R54 billion error means Eskom is being allowed an extra approximately 18% price increase over and above the MYPD6 price increases already granted,” he said.