City of Cape Town slams Nersa's decision on Eskom's electricity tariff increase

The City of Cape Town has sharply criticised the National Energy Regulator of South Africa (Nersa) for approving an additional electricity tariff increase for Eskom, arguing the decision unfairly shifts the consequences of a regulatory error onto consumers.

Nersa’s decision lifts Eskom’s permitted annual tariff hikes from the previously approved range of about 5%–6% to nearly 9% for each of the next two years, after the regulator conceded it had made a calculation error in Eskom’s original application. The City says the regulator should have scrapped the increase altogether and undertaken a full redetermination of Eskom’s multi-year price application.

Mayco Member for Energy Xanthea Limberg said the approval amounted to “rubber stamping” an unjustified increase, despite evidence that Eskom’s financial position is stronger than what was presented to the regulator.

Limberg pointed to Eskom’s interim financial results, which show the utility is already generating substantial profits under the lower, originally approved tariffs. “That raises serious questions about the need for any additional increase,” she said, adding that electricity consumers were now being burdened with an extra hike more than 50% higher than initially permitted.

According to the City, its submission opposing the increase identified several flaws in Eskom’s application and in Nersa’s assessment, including the regulator’s failure to properly account for asset depreciation, possible inaccuracies in Eskom’s financial forecasts, and the use of outdated asset valuations. Limberg said Eskom’s improved performance could only reasonably be explained by higher electricity sales, lower operating costs, or a combination of both — factors that warranted a full reassessment of the Multi-Year Price Determination rather than approval of an additional increase.

The City has confirmed it is assessing its legal options following Nersa’s decision. Under Section 15(1) of the Energy Regulation Act, Eskom is not permitted to earn excessive margins on electricity sales or recover the costs of inefficient operations from consumers.

As previously reported, Nersa earlier acknowledged errors in its January 2025 determination for Eskom’s tariffs over the 2025/26 to 2027/28 period. Those errors led to a settlement with Eskom in July, which was later overturned in December when the High Court of South Africa rejected the agreement and ordered the regulator to make a fresh determination after public submissions.

On Sunday, Nersa announced that Eskom’s tariffs would now increase by 8.76% from April this year and 8.83% from April 2027, up from the previously approved 5.36% and 6.19% respectively. While Eskom has long argued that regulatory decisions contributed to its prolonged financial crisis, the utility recorded its first full-year profit in eight years in the last financial year, buoyed by a government bailout and improved performance at its coal-fired power stations.

The City has consistently warned that correcting regulatory mistakes through higher tariffs risks unfairly transferring the cost of those errors onto households and businesses — a concern it says has now been realised by Nersa’s latest decision.

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Cape Argus