Urgent review needed for Nersa as Eskom's price hikes raise concerns

South Africa must review power, governance, and oversight structures, starting with the National Energy Regulator (Nersa), which recently admitted to a R54 billion miscalculation in its assessment of Eskom’s price hike application earlier this year, experts say.

Nersa’s error means that electricity prices will rise above inflation for two consecutive years. For the 2026/27 financial year, the tariff hike is 8.76%, up from 5.36%, and for 2027, it is 8.83%, up from 6.19%.

Professor William Gumede, a governance expert from Wits University, said the fact that Nersa has made a R54 billion miscalculation is reason enough for South Africa to review its relevance and capacity.

“It is unacceptable that Nersa has made such a big mistake. Firstly, we have to hold Nersa accountable for the R54 billion miscalculation. Who among them made that mistake, or allowed that mistake to happen? Where was the oversight? How did the board let this major mistake happen? Where is the executive team? We have to ask the question: do the board and executive team have the capacity?

“Is the governance structure of Nersa still appropriate? Is it supposed to have some kind of oversight over Eskom, although it’s on the pricing side? Is there not a conflict of interest between Nersa and Eskom? Over the years, have they become too close? The regulator must keep a distance from the entity or institution it regulates. So, is there a sufficient distance between Nersa and Eskom?” Gumede said.

He added that Eskom has been increasing prices for a very long time, almost every year, and Nersa has not played a role in defending the public and holding Eskom accountable.

“Eskom has been poorly managed, incompetently managed, and has been a site of patronage, and that has been the main reason why it has not delivered the country the power. Where has Nersa been with all these things happening at Eskom? Why didn’t they intervene and get heads rolling?” he said.

Gumede stated that the bill from the miscalculation cannot be passed on to consumers, businesses, and the public.

“As citizens, we have to get an honest answer as to whether it is still profitable for South Africans to allocate funds to Eskom? Are we going to pour money into a bottomless pit just like the SA Post Office, and see no return on investment? We should instead be putting money into start-ups in renewable energy. The country is struggling economically because the money we receive from taxpayers is allocated in the wrong places,” Gumede said. 

He highlighted that over the last couple of weeks, several companies, both local and international, shut down.  

“In every company’s reason for closure, one of the factors has been electricity. Either low power or high-priced power. Eskom has already been a drain on the country’s economy. It has actually cost us jobs, businesses, and economic growth. As a country, we can ill-afford high energy prices. We need reliable and affordable energy,” Gumede said.

He highlighted that most parliamentarians struggle with understanding complex institutions like Nersa, and called on citizens and civil society to demand transparency in public institutions like Eskom, monitor them like they do with the national Budget.

Charles Hlebela, Nersa spokesperson, stated that after the assessment of Eskom’s review application, Nersa identified errors that resulted in underestimation in certain components of Eskom’s application.

“Notwithstanding this error, it must be stated that the cumulative balances principle was properly applied for transmission and distribution businesses. After rectifying these errors, Nersa concluded that Eskom was entitled to an additional R54 billion over the three-year MYPD6 period, an amount substantially lower than Eskom’s original claim of R107 billion. The parties settled for R54 billion on 30 July 2025,” Hlebela said.

He added that Nersa cannot undertake the public participation process normally followed when considering applications, because this is a judicial review consideration.

He added that there will be no additional price increase for the 2025/26 financial year.

Dawie Roodt, chief economist at Efficient Group, said this is not the first time Nersa has miscalculated; they do it every year, and even the most recent calculation is still a miscalculation.

He likened the Eskom/Nersa price determination to predicting what will happen to the rand and interest rates, which economists do, but don’t get right, and can never get right.

“Every year, Eskom will put a team of economists together, and they will make all sorts of predictions, and then Eskom, based on these predictions, will go to Nersa and say we want an 8% increase, and these are our calculations. Then Nersa will do the same, put a team of economists together, and they will also make calculations, and they will look at Eskom’s and then make their own determination. Then off they go and increase the price of electricity,” Roodt said.

He added that neither Eskom nor Nersa knows what the price of electricity should be because the price of anything is only what people are prepared to pay. It doesn’t matter if it’s diamonds or electricity or bread. The only way you can determine what the price of a thing is is for that thing to be traded freely in the market.

“For Nersa and Eskom to say that they know what the price of electricity is is just a pretence. We should have closed down Nersa a long time ago,” Roodt said.

He added that the impact of this error is going to be devastating for the economy, which is not growing, and that the economic growth for this year is well below 1%.

“Any price increase spills over to other things, like food prices, and it will put pressure on inflation, especially for low-income households. It has a negative impact because the paying customers will run away, and look for alternative sources, and that will cause a dent in Eskom’s finances,” Roodt said.

Professor Purshottama Reddy, a public governance expert at the University of KwaZulu-Natal, said state-owned entities (SOEs) that are involved in the provision of basic services in South Africa should be very closely monitored, especially if they have a monopoly over that particular service. 

“The basic needs of the populace, especially the indigent and vulnerable, have to be factored into decision-making. If the process is not managed properly and the governance of the SOE in particular is far from ideal, we are going to have challenges. The citizenry is likely to lose confidence in the SOEs in question and ultimately the government. There has to be public participation in the relevant process and ongoing engagement with the citizenry and consumer,” Reddy said. 

He added that the costs of basic services, such as water and sanitation, and electricity, should be accessible and affordable to all communities.

“The boards and executive management of the SOEs should be appointed on merit, and they should have the requisite qualifications, experience, expertise, and, more importantly, the passion for basic service delivery. They should be passionate about making a difference in the lives of the citizenry and local communities,” Reddy said.

Tsakane Khambane, spokesperson for the Ministry of Electricity and Energy, stated that the department is revising the Electricity Pricing Policy (EPP) to curb unsustainable price hikes and ensure electricity remains accessible, especially for low-income households. 

“The new EPP aims to make tariffs more reflective of actual costs while balancing the need for social equity. The department is revisiting the affordability thresholds and the adequacy of the 50 kWh monthly allocation, which is no longer sufficient for basic needs. 

“The department is working in collaboration with CoGTA and local municipalities to ensure that a greater number of indigent customers are accurately registered, and that allocations from the National Treasury are effectively directed to these beneficiaries,” Khambane said.

On Free Basic Electricity (FBE), she said, efforts are underway to align municipal indigent registers with national databases to reduce duplication and exclusion errors. “Following reports of misappropriated funds, the Department is tightening oversight mechanisms to ensure that Treasury allocations are used exclusively for their intended purpose.” 

Khambane highlighted that the National Treasury has put in place a Municipal Debt Relief Programme that aims at helping financially distressed municipalities reduce their arrears owed to Eskom, which have ballooned past R100 billion. 

She said municipalities can have portions of their Eskom debt written off up to one-third if they meet strict conditions like ringfencing payments and keeping current accounts up to date

Khambane stated that Nersa and the department have intensified monitoring of Eskom’s spending to ensure funds are directed toward grid upgrades, maintenance, and reducing load shedding.

gcwalisile.khanyile@inl.co.za