Eskom accepts ‘new reality’ of ‘low electricity tariffs’ in future

Eskom has gone through the five stages of grief in quick succession, with the power utility now at the last stage — acceptance — in response to the electricity tariff decision by South Africa’s energy regulator for the next three years.

Eskom has been put in its place by the National Energy Regulator of South Africa (Nersa), which awarded it a 12.7% tariff increase for the coming year — substantially lower than the 36% increase it had requested.

Eskom embraced four stages of grief after Nersa broke the news: denial (shock at the approved low tariff), morphing to anger, then bargaining and depression (making sense of the regulator’s decision on its financial and operational affairs).

Eskom is now at the acceptance stage, with its board chair, Mteto Nyati, accepting that this may be the last time the power utility gets away with double-digit and consumer inflation-beating tariff increases.

“We are now operating under a new reality,” said Nyati at a briefing in Parliament on Friday, 31 January, a day after Nersa’s decision, adding this reality would be marked by “low electricity tariffs” in the future.

“The citizens of our country say the increases should be aligned to inflation — single-digit increases — because they are under financial strain,” said Nyati.

South Africa’s energy landscape is fast changing, with renewable energy sources becoming a formidable part of the country’s energy mix, and the procurement of such energy coming at far cheaper rates than Eskom’s coal-generated electricity. The merits of inflation-beating tariff increases are hard to accept when the cost of solar photovoltaic and wind power has declined since 2011 in every bidding round of the government’s renewable energy procurement programme.

For example, it cost Eskom about R1.50 to generate a kilowatt-hour (kWh)  during its 2023 financial year, while the cost of solar electricity was below R0.50 per kWh during the seventh bidding window of the government’s renewable energy procurement programme.

The approved tariff increase of 12.7% takes effect on 1 April 2025 for customers whose electricity is supplied directly by Eskom; and on 1 July for customers relying on local authorities (municipalities). Municipalities also add a surcharge to the tariff to cover the costs of buying electricity from Eskom and distributing it to end-users.

At 12.7%, the electricity tariff increase approved for Eskom is four times the inflation rate (the latest reading was 3%) and continues the long-term pattern of unsustainably high electricity prices.

The tariffs have increased by 408% between 2010 and 2024, while the consumer inflation rate went up by 196% over the 14 years.  During this period, Eskom blackouts worsened — resulting in people paying more for electricity, the supply of which wasn’t reliable.



Electricity minister Kgosientsho Ramokgopa has admitted that (the current) electricity pricing is not sustainable. After the Nersa decision, Ramokgopa reiterated that his office was considering various policy interventions to reduce tariff increases in the future.

“We have an obligation to cushion households, low-to-high income households and industry… We will work with Eskom to see how to cushion consumers going forward. There is some work that the ministry is concluding and we will come out to the public on the kind of interventions that we will make,” Ramokgopa told MPs at Friday’s briefing attended by Nyati and other Eskom officials.

Ramokgopa’s team did not respond to Daily Maverick’s request for an interview to explore the policy interventions being considered.

Ramokgopa previously suggested that the National Treasury could delay the full implementation of carbon taxes, which make up a small aspect of the electricity tariff hike. The delay could have serious implications for companies responsible for heavy emissions in industries such as manufacturing, oil and gas. It could also harm South Africa’s global reputation as the country had promised to reduce emissions in exchange for funding commitments from the developed world.

At a press briefing with journalists on Friday, after Eskom announced the return of blackouts, Ramokgopa backtracked, saying the decision on the carbon tax would be left to the Treasury.

GNU ructions  

The electricity tariff issue has the potential to create more tensions between partners in the Government of National Unity (GNU), mainly the ANC and DA, which are already at odds with each other over basic education and land expropriation laws. Reducing the cost of living and economic growth are core priorities of the GNU, and skyrocketing electricity prices undermine these priorities.

Kevin Mileham, the DA spokesperson on electricity and energy in Parliament, said the tariff issue was not a “red-line issue” for the party in the GNU. “However, it is an issue that the DA is trying to mitigate the adverse impact to consumers so that they aren’t overburdened with massive electricity prices and unaffordable increases,” Mileham told Daily Maverick.

Mileham has recommended a review of the electricity pricing policy, which will also review components of electricity tariffs. “This is long overdue. It is something that South Africa needs to review regularly, but has not been done for years,” he said.

Underscoring this is that in its latest Nersa application to motivate tariff increases, Eskom brought up factors that had nothing to do with the mechanics of electricity generation, distribution and transmission.

Eskom said that its response to the effects and aftermath of State Capture as well as criminality, in the form of fraud, corruption, theft and sabotage, had further weakened its financial situation and operational strength. In other words, the public would be punished (by paying more for electricity) for Eskom’s failure to detect and prevent corruption perpetrated by its people, including former CEOs, financial executives, board members and engineers.

The lower Nersa-approved tariffs will create financial hardship for Eskom. Not only was it granted a 12.7% increase (rather than the requested 36.15%) for 2025/26, but it was also granted lower increases for the next two years. Nersa approved a 5.36% increase for 2026/27 (Eskom requested 11.81%), and 6.19% for 2027/28 (the power utility asked for 9.1%).

The lower tariffs mean that Eskom will have a shortfall of R250-billion in its revenue from electricity sales over the next three years. The utility, which turns 102 years old on 1 March, will have to find ways to plug the revenue gap while remaining relevant in a rapidly changing energy environment.

Eskom CEO Dan Marokane said the Nersa decision was being studied and he would respond to it in detail soon. DM