. (Photo: Waldo Swiegers / Bloomberg via Getty Images) 
On Wednesday, 27 August, the National Energy Regulator of South Africa (Nersa) announced that it had reached an out-of-court settlement with Eskom after errors were made in determining the utility’s revenue for the current and following two financial years.
As part of the settlement, the regulator agreed to allow Eskom to recoup R54-billion. Nersa spokesperson Charles Hlebela said that because the matter falls under a judicial review process, the regulator could not implement the usual public participation procedures that normally apply when considering applications for tariff applications.
What this means
As a result of the settlement, on 1 April 2026, Eskom’s tariffs will now jump by 8.76% instead of the 5.36% increase announced in January this year. For the 2027/28 financial year, tariffs will increase by 8.83% instead of 6.19%.
The “secretive” out-of-court settlement has sparked outrage. The South African Federation of Trade Unions (Saftu) called it a betrayal of the public, arguing that while the deal patches up Nersa’s technical blunders, it piles yet another burden on the working class and poor households already being crushed by austerity, unemployment and the rising cost of living.”
Energy expert Chris Yelland said Nersa’s mistake was absolutely astounding. “It speaks to a lack of professionalism, a lack of competence, I believe, within Nersa, because the methodology is well known to Nersa.
“The problem was not with Nersa’s methodology, but with Eskom’s inefficiency. So, the point is, Eskom has to balance its books, and if it doesn’t get the money from the tariffs, it gets it from the government via us, via our taxes."
Either way, he added, consumers will end up having to pay for Eskom’s inefficiencies.
Meanwhile, the Democratic Alliance (DA) has written to the chairperson of Parliament’s Portfolio Committee on Electricity and Energy, calling for an urgent review of the settlement agreement between Eskom and Nersa.
In January this year, Nersa announced that it had approved a 12.7% tariff increase for Eskom for the 2025/26 financial year – about one-third of the 26% utility had asked for.
Nersa’s chair, Thembani Bukula, said then that Nersa had heard the pleas of domestic consumers and businesses - that an electricity increase along the lines of Eskom’s original request of 36% would be disastrous for households and businesses.
Read more: Nersa approves 12.7% tariff increase for Eskom — one-third of its original ask
Where did it go wrong?
According to Hlebela, the error goes back to 30 January 2025, when Nersa made the following decisions on Eskom’s allowable revenue application:
- Approved revenues of R384,610-million for the 2025/26 financial year, which translates to a percentage increase of 12.74%;
- Approved revenues of R409,524-million for the 2026/27 financial year, which translates to a percentage increase of 5.36%; and
- Approved revenues of R436,860-million for the 2027/28 financial year, translating to a percentage increase of 6.19%.
Fast forward five months to 2 July 2025, when Eskom filed a judicial review of the regulator’s decision in terms of section 10(3) of the National Energy Regulator Act of 2004.
Hlebela said Eskom approached the High Court seeking to have the regulator’s revenue determination for the three financial years from 1 April 2025 to 31 March 2028 reviewed and set aside, citing a R107-billion shortfall.
“Eskom challenged the energy regulator’s decision only in respect of a revenue shortfall that occurred in the generation business due to a data input error, which mainly affected depreciation and the Regulatory Asset Base (RAB) value for the generation business.
“The reliefs Eskom sought through the judicial review were assessed to evaluate the validity of Eskom’s claims and to determine whether Nersa could mount a sustainable opposition to the grounds of the review application,” Hlebela said.
“Drawing on the findings from the founding papers and relevant case law on administrative decision reviews, Nersa then decided not to oppose the application. However, this decision did not imply acceptance of all the reliefs Eskom requested in its review application,” he said.
“After reviewing the founding papers and established case law, both parties decided to engage in settlement negotiations to amicably resolve the issues in a manner that would not compromise the interests of Eskom and its customers. Nersa approached these discussions by carefully considering Eskom’s application, the decisions made and the issues raised in the court documents.
“Nersa also emphasised notwithstanding this error, it must be stated that the cumulative balances principle was properly applied for transmission and distribution businesses,” Nersa statement continues.
After rectifying these errors, Nersa concluded that Eskom was entitled to an additional R54-billion over the three-year Multi-Year Price Determination (MYPD6) period, an amount substantially lower than Eskom’s original claim of R107-billion. The parties settled for R54-billion on 30 July 2025.
However, the settlement between Eskom and Nersa can only come into effect after it has been made an order of the court, which has not yet been secured, delaying the release of Nersa’s statement to avoid pre-empting the decision of the courts.
Call for investigation
MP Kevin Mileham, the DA spokesperson for electricity and energy, said that as a result of the so-called “mistake”, South Africans, already struggling under the weight of high electricity costs and a fragile economy, will now face additional tariff hikes on top of the already-steep increases previously approved.
“It is unacceptable that a technical error in the calculation of depreciation and the Regulatory Asset Base could result in such a massive financial burden being shifted onto consumers. This points to systemic failures within Nersa’s processes and calls into question the credibility of its regulatory oversight.
“South Africans deserve answers. The DA calls on Parliament’s Portfolio Committee on Energy and Electricity to urgently investigate how this error occurred, why it was not detected earlier, and what safeguards will be put in place to ensure that similar blunders are never repeated,” he said.
Working class punished ‘unfairly’
Meanwhile, Saftu warned that while the settlement may correct technical errors, it unfairly punishes the working class and poor households already crushed by austerity, unemployment and soaring living costs.
Saftu national spokesperson, Newton Masuku, pointed out South Africa already has some of the highest electricity prices in Africa relative to income levels.
According to Saftu, the latest increases will deepen energy poverty as poor households are disconnected or forced to limit usage, as well as increase operating costs for municipalities, many of which already face collapse.
“Nersa’s decision to settle outside the normal public participation process raises serious concerns about transparency and accountability. The working class cannot be expected to bear higher tariffs negotiated behind closed doors while their voices are excluded. We will be taking this fight to Nersa, Parliament, and the streets,” Masuku said. DM.