Payback time for Eskom
Energy expert Chris Yelland says that the National Energy Regulator of South Africa (Nersa) should be cutting electricity tariffs to compensate for years of irregular and wasteful expenditure by Eskom.
Yelland’s comment came in response to Nersa announcing a settlement with Eskom over a data input error in the regulator’s sixth multi-year price determination.
The mistake resulted in the regulator’s decision, announced in January 2025, allowing the power utility to collect R107 billion less in revenue over the 2026, 2027, and 2028 financial years than it should have.
Eskom took the matter on judicial review in July 2025, and after negotiations with Nersa, the parties settled on allowing the power utility to collect an extra R54 billion in revenue.
This will be facilitated through higher electricity hikes than previously announced, starting in the 2026/2027 financial year, with an effective 18% tariff increase over the next few years.
Yelland regarded the decision as “absolutely astounding,” considering Eskom already passed “massive imprudently and inefficiently incurred costs” through increased customer tariffs over the last decade.
“Nersa should be clawing back these costs on behalf of electricity customers in the form of reduced electricity tariffs going forward,” Yelland said.
Eskom has defended its exorbitant electricity tariff hikes from 2007 as necessary to cover its rising costs. However, arguing for cost recovery is flawed when it comes to a monopoly like Eskom.
Without competition in the market, the power utility has no incentive to control input costs. Eskom’s cost to produce electricity has more than doubled over the past decade.
One of the utility’s biggest sins is its enormous wage bill. According to an analysis by the World Bank in 2019, Eskom would have to cut over two-thirds of its workforce to be aligned with utilities in other countries.
In addition, its cost per employee has ballooned from R38,000 in 1990 to R913,000 by 2024 — a 976% increase. For reference, the inflation rate over the same period was 783.6%.
Furthermore, the power utility has incurred billions of rand in fruitless and wasteful expenditure on numerous projects, including procuring items at grossly inflated prices.
For example, it previously paid R26 for single-ply toilet rolls with a market price of R5, R238,000 for a mop, R80,000 for knee pads that cost R150, and R51 for black refuse bags with a market price of R2.99.
Eskom has passed these increased costs on to customers. Since 2007, when load-shedding was first implemented, electricity prices have increased by well over 900%.
Eskom can also recover historical shortfalls in revenues through the Regulatory Clearance Account (RCA), which allows for additional future price hikes.
Questions over lawfulness of settlement
In a recent interview with SAFM’s National Pulse, independent energy analyst Tshepo Kgadima said he believes that the Nersa and Eskom agreement was unlawful and could be set aside.
“We are dealing here with people who are doing guesswork instead of actually being knowledgeable and confident of the numbers,” Kgadima said.
“I think the most appropriate response to this is to be outraged to the extent that we should be demanding that heads must roll at both Eskom and Nersa.”
A recent MyBroadband analysis showed that an inflation-based average electricity tariff should have been around R1.23 in 2025, 42% lower than the actual figure of R2.12.
In addition, the average tariff is far from what residential users pay. It is significantly distorted by the much-reduced preferential tariffs enjoyed by Eskom’s big industrial customers.
For example, Eskom’s biggest customer, the South32 Hillside Aluminium Smelter, pays around half the rate per kWh of residential electricity users.
MyBroadband’s analysis of residential electricity prices in 14 metros and cities found that the average price per kWh ranged between R3.34 and R4.21.
The table and graph below summarise how Eskom’s official average electricity tariff has increased and where it should have been if it had been aligned with inflation.
| Year | Average tariff (c/kWh) | Aligned with inflation (1 April 2015 as base date) |
|---|---|---|
| 2015 | 76.41 | 76.41 |
| 2016 | 82.53 | 81.10 |
| 2017 | 89.13 | 85.43 |
| 2018 | 93.79 | 89.29 |
| 2019 | 106.80 | 93.26 |
| 2020 | 110.93 | 93.02 |
| 2021 | 128.27 | 100.24 |
| 2022 | 140.59 | 106.13 |
| 2023 | 166.82 | 113.35 |
| 2024 | 188.07 | 119.25 |
| 2025 | 212.03 | 122.62 |
| Total increase | +177.49% | +60.48% |
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