Bigger hikes to follow Nersa’s R54bn behind-closed-doors settlement with Eskom

Eskom’s electricity tariffs are poised to rise by 8.76% on April 1 next year instead of the 5.36% approved previously, and by 8.83% instead of 6.19% in 2027/28 after the National Energy Regulator of South Africa (Nersa) reached a settlement agreement with the State-owned entity in relation to errors made by the regulator in its sixth multiyear price determination (MYPD6) revenue decision.

Eskom legally challenged the MYPD6 decision in July, arguing that the erroneous way in which Nersa calculated the regulatory asset base value for the generation business, and which affected the depreciation amount approved, had left it with a revenue shortfall of R107-billion.

In a statement, Nersa said that its own review of the decision identified errors that resulted in an underestimation in certain components of Eskom’s application – specifically an error on the depreciation amount captured – that had resulted in a shortfall of R14.5-billion.

In addition, another error relating to an asset transferred for commercial operation, where the cumulative balance principle was not applied for the generation business had affected the 2026/27 and 2027/28 financial years.

Nersa said that it had decided not to oppose the application despite not agreeing with the relief Eskom requested in its review application and had instead opted to settle the matter.

“After rectifying these errors, Nersa concluded that Eskom was entitled to an additional R54-billion over the three-year MYPD6 period,” Nersa said, reporting that the parties settled on that amount on July 30, 2025.

The disbursement of the settlement amount would be phased-in over a period that extends beyond the MYPD6 period, with the first R12-billion to be recovered during the 2026/27 financial year, followed by R23-billion during the 2027/28 financial year.

The balance would be “addressed” in the next MYPD determination cycle, Nersa said.

The settlement had not been subjected to a public participation process, with online publication Moneyweb having provided a detailed account of how the settlement discussion was removed from the agenda of a public Nersa electricity sub-committee meeting and subsequently discussed during a meeting that was closed to the public.

The regulator’s meetings are typically open to the public.

“This settlement agreement represents a fair and balanced resolution. It safeguards the interests of South African electricity consumers while addressing Eskom’s legitimate revenue requirements to ensure operational sustainability – both achieved by the pragmatic settlement agreement,” Nersa fulltime regulator member responsible for electricity regulation Nomfundo Maseti said in a statement.

Eskom has successfully challenged several previous Nersa decisions in the courts, including its illegal decision to deduct a R69-billion government equity injection into Eskom from its allowable revenue for the three financial years of 2020, 2021 and 2022.