Win for people who pay for electricity in South Africa

The National Energy Regulator of South Africa (Nersa) rejected Eskom’s arrears debt application for the 2025/26, 2026/27, and 2027/28 financial years.

The power utility’s revenue application for the next three financial years hoped to recoup some of its arrears debt from municipal and non-municipal consumers through electricity tariff increases.

This would mean law-abiding electricity customers would pay more to help Eskom cover the costs of consumers who steal the electricity they use.

Eskom’s application included an arrears debt amount of R8.91 billion in 2025/26, increasing to R9.92 billion in 2026/27 and R10.75 billion in 2027/28.

Nersa approved arrear debt amounts of R0 for all three financial years.

“Nersa considered different scenarios in the determination of arrear debt, and each scenario includes all economic and social issues, as well as input by stakeholders,” the regulator said.

The first scenario considered was allowing Eskom’s applied-for arrear debt. However, it said this scenario would significantly affect the broader economy.

“For Eskom, allowing arrear debt can provide short-term relief by enabling it to collect more revenue and assist in the municipal debt crisis,” said Nersa.

“However, it would mean high electricity prices for South African residents.”

The second scenario considered was disallowing Eskom’s applied-for arrear debt, which the regulator said would promote more disciplined revenue recovery by the utility.

“This will result in a more controlled financial environment for Eskom,” said Nersa.

“This will further allow municipalities to focus on paying off existing debt by working with Eskom and the government, rather than creating new debt.”

It added that, by disallowing arrears debt, paying customers won’t be burdened by Eskom’s failure to recover revenue.

The final scenario considered was capping Eskom’s applied-for arrear debt, which Nersa noted could provide a balanced approach to debt management.

“Provision for arrear debt is an accounting concept that assists organisations in anticipating and preparing for potential losses,” the regulator said.

“Allowing a cap on arrear debt may assist Eskom in fostering a more manageable and equitable financial environment in debt recovery.”

It added that, in this scenario, paying customers also won’t be burdened by Eskom’s failure to collect revenue.

The energy regulator adopted the second scenario, disallowing Eskom’s application for arrear debt for the following reasons:

• Paying customers shouldn’t bear the burden of inflated electricity prices for Eskom to recover debt.
• Eskom stated that it has mechanisms to reduce the consequences of non-payment, and allowing the arrears application would let it avoid the difficulties businesses face regarding unpaid debts.
• A business as large as Eskom should be able to operate efficiently and employ measures to recover its debt.

The table below summarises Eskom’s applied-for arrears debt amounts for the 2025/26, 2026/27, and 2027/28 financial years and the amounts Nersa approved for each year.

Municipal debt reaching uncontrollable levels

In the document, Nersa describes municipal debt to Eskom as “reaching uncontrollable levels of around R90 billion” despite various government departments stepping in to help address the matter.

“Nersa notes and commends Eskom’s efforts to implement strategies and its application to limit impairment costs to 2% despite them being closer to 5%,” it said.

“The current economic environment exacerbates the current overdue customer debt and non-payment; however, paying customers should not be burdened for debt not collected by Eskom.”

Municipal debt owed to Eskom has escalated significantly in recent years. In July 2024, electricity and energy minister Kgosientsho Ramokgopa warned that if left unaddressed, it could reach R3.1 trillion by 2050.

At the time, municipal debt to Eskom amounted to around R78 billion.

“It’s important that we have engagement with municipalities. They are owing Eskom over R78 billion,” said Ramokgopa.

“If the current trend line continues, the collections and payments we are seeing now, if you extrapolate it to 2050, it’s about R3.1 trillion. This is huge.”

To repay their debts to Eskom, municipal power providers are forced to apply for more significant electricity price adjustments each year, which Ramokgopa warned could result in energy poverty.

He said energy poverty occurs when a country’s residents have access to electricity but can’t afford to pay for it.

“They must choose whether to reload the units on prepaid, buy bread, or pay school fees. Those are difficult choices,” said Ramokgopa.