Cash-strapped consumers are looking down the barrel of steeper electricity bills after the National Energy Regulator of SA (Nersa) admitted miscalculating Eskom’s revenue shortfall and quietly green lit a R54bn tariff claw back.
The out-of-court settlement phases in R12bn of additional tariffs in 2026/27 and a further R23bn in the 2027/28 financial year, with the final tranche for 2028/29 yet to be set.
Eskom had demanded R107bn, saying there were errors in Nersa’s decision.
This is not Nersa’s first high-stakes blunder. Over the past decade court challenges have exposed repeated miscalculations in its price determinations. Its Sasol gas tariff methodology was struck down by the Supreme Court of Appeal and the Constitutional Court, and branded excessive by the Competition Tribunal in 2024.
"In the past 10 years, Nersa has been taken to court many times over its decisions, and mistakes were often found," said Deon Conradie, an independent electricity pricing analyst, noting the latest error mirrors a previous one.
"Given Nersa’s history, one wonders when they will implement proper quality check processes to prevent recurring errors. This cannot continue."
The implications of blunders by Nersa, led by Nomalanga Sithole, are far-reaching. Tacking on an extra R54bn to electricity bills will jack up headline consumer inflation, a scenario that will shrink the Reserve Bank’s room to cut rates and risk derailing its 3% inflation target. It could also compel it to hold or even hike borrowing costs in an economy trapped in low growth.
In a statement, Nersa said the phased rollout of the R54bn settlement will cushion consumers against sudden bill hikes and spare both sides a drawn-out legal fight.
"The settlement agreement represents a fair and balanced resolution. It safeguards the interests of electricity consumers while addressing Eskom’s legitimate revenue requirements to ensure operational sustainability, both achieved by the pragmatic settlement agreement," said Nomfundo Maseti, Nersa full-time regulator member responsible for electricity regulation.
Industrial sectors with heavy electricity consumption, such as mining, metals refining, chemicals and manufacturing, have long voiced concerns over elevated electricity tariffs.
Since 2007, tariffs have climbed nearly 11-fold, far outpacing a nearly four times rise in inflation, forcing smelters to idle, mines to trim jobs and companies to put off investments.
"We accept people can make mistakes, but this is a mistake involving billions. For the mining industry, smelters and others, this has a significant impact," said Bongani Motsa, acting chief economist at the Minerals Council SA.
He said the ferrochrome industry once gave SA 50% of the global market, but rising electricity costs allowed China to overtake.
"Today we have virtually no capacity left for chrome or manganese beneficiation."
The Nersa bungle heaps pressure on President Cyril Ramaphosa’s plan to break up Eskom. The linchpin is the wholesale electricity market, which would open floodgates of private capital and let competing energy producers set prices, not a single regulatory formula.
"The pricing system is supplier-centric and not consumer-focused. Unless reforms are expedited, SA’s energy-intensive sectors will continue to lose global competitiveness," Motsa said.
High energy costs are damaging the mining industry, which accounts for about 8% of GDP, according to a study by Boston Consulting Group. It said SA’s energy costs are the fourth highest in a comparison of similar mining jurisdictions and are expected to continue increasing.
Struggling steel producer ArcelorMittal SA (Amsa) bought electricity from Eskom to the tune of R3.2bn in the 2024 financial year, more than half of what it paid its nearly 9,000-strong workforce. Amsa noted in its annual report that since 2007, electricity tariffs have increased by more than 800%.
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