Key to Eskom solving electricity price hike nightmare

Eskom’s unbundling into separate entities is key to solving the issues that are causing it to hike electricity prices.

This is according to EE Business Intelligence managing director and energy expert Chris Yelland, who told Cape Talk that numerous factors are currently behind Eskom’s tariff increases.

“If you want to get the price affordable, first of all, one has to institute some significant reforms that will cut out waste, theft and non-payment, fraud, and all other inefficiencies within Eskom,” Yelland said.

“You cannot just paper this over with a bit of accounting. The restructuring and unbundling of Eskom is key to this.”

This follows electricity and energy minister Kgosientsho Ramokgopa’s statement that he is in the process of mitigating the effects of tariff increases on the poor.

Yelland explained that ghost vending, the process of loading electricity meters with illegal tokens, has cost Eskom roughly R27 billion a year and has been going on for some time.

However, he says this loss has been lost “in the amorphous mass of the greater Eskom accounting.” Therefore, hiding this is no longer possible because Eskom has been unbundled and ring-fenced into generation, transmission, and distribution.

“Now that it is ring-fenced, this R27 billion of losses by Eskom distribution per year stands out like a sore thumb,” Yelland argues.

The same can be said for all the other factors that have led Eskom to need to increase its prices, such as procurement corruption, municipal debt, and inefficiencies within its supply chain.

“The need for restructuring is to make Eskom and its operations more transparent and visible to understand where the problems are.”

Eskom asked the National Energy Regulator of South Africa (Nersa) for a 36.15% electricity tariff adjustment for the 2025/26 financial year in its tariff application.

However, Nersa only approved a 12.7% Eskom electricity tariff hike for the coming financial year, effective 1 April 2025, was approved.

The effective increase is 26.09% over three years, a significant reduction from the 66% increase for which Eskom had applied.

Nersa also approved a 5.36% increase for the 2026/27 financial year and a 6.19% increase for 2027/28.

Ramokgopa’s statement to reform South Africa’s electricity pricing policy to protect the poor from price hikes came in response to these increases.

The minister said that once Eskom’s generation issues have been resolved and load-shedding is over, South Africa will face an electricity pricing challenge, as in other parts of the world.

Nersa’s decision-making process considered affordability for vulnerable sectors such as indigent customers and some industrial sectors.

It also took into account submissions from its stakeholders.

However, Ramokgopa said Nersa’s policy of approving Eskom’s tariff hikes does not include ways to protect the poor from these increases.

Thus, the ANC has said that the government must review this policy, which Ramokgopa said has been passed on to him.

Because Nersa follows policy, the way to mitigate the effect of price increases on the poor is to “change the policy, and Nersa will change the equation,” he said.

However, if this issue is left unchecked, Ramokgopa believes the consumer’s ability to afford electricity will soon become the country’s most significant issue.

Therefore, he hopes to finalise this by the end of the year and make it available for public participation.

Despite the policy’s lack of mechanisms to protect the poor, Eskom has applied for lower tariffs for Homelight 20A households in the past.

Eskom Homelight 20A — the electricity rates applied to informal settlements — only saw a 10% increase for the 2024 financial year instead of 18.65%.